USD/BRL: Election Result may Cause Turmoil in Brazilian Real – 03 October 2022

October 3, 202227 views0

The Brazilian election held yesterday had a closer than expected outcome, which will likely cause a rather turbulent day for the USD/BRL.

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The USD/BRL closed around the 5.4154 ratio going into the weekend, having crept slightly upwards incrementally on Friday as the day came to an end. Yesterday’s general elections in Brazil have seemingly produced more questions, which financial houses will have to consider today and the next few weeks per the implications. Speculators need to expect a ‘gap’ upon the opening of trading for the USD/BRL today. The question is which direction the currency pair will take.

Financial houses do not know the results to elections before they happen, what they do is wager on the potential outcomes like speculators. Yesterday’s general election in Brazil was closer than anticipated and the final outcome is now in greater question. Although a second election was a near certainty, and will definitely happen the last Sunday of October, the leftist candidate, Lula da Silva, was anticipated to do better than the actual results have demonstrated. Current President Jair Bolsonaro, the right leaning candidate, was expected to struggle but did better than predicted.

The Presidential Election on the 30th of October may be closer than was anticipated

The USD/BRL may have seen additional buying action in the past week because some financial houses expected the leftist candidate to perform better yesterday. Yes, the U.S Federal Reserve‘s hawkish interest rate policy is certainly having an effect too. However, the potential of a left leaning government taking power in Brazil likely combined to cause additional bullish behavior in the USD/BRL.

According to some media reports, conservative politicians with affiliations to current President Jair Bolsonaro did better than anticipated too.The unknown of the outcome in the deciding election at the end of this October will factor into USD/BRL trading in the coming weeks.

This Morning’s Opening in the USD/BRL will be Intriguing to Watch

If a trader has a position still open in the USD/BRL carried over from last week, they should be ready for a volatile opening. Today’s trading in the USD/BRL will be a good barometer of how financial houses interpret the outcome of the election. Retail traders should expect to see wide swings and a steady flow of tests challenging both support and resistance ratios throughout the day.

Because the results were closer than expected, this could potentially mean the USD/BRL will see some selling. However, speculators should be extremely careful and if they choose to participate in the USD/BRL, they need to use a full spectrum of risk taking tactics, including stop losses and take profits.

The near term for the USD/BRL will be potentially chaotic. To take advantage of this, speculators may want to use very conservative leverage, but closer take profit targets and slightly wider stop losses to allow their trades some time to work in the expected choppy conditions to come.