USD/BRL: Risks and Higher Price Range for Traders Intriguing – 29 September 2022

September 29, 20228 views0

After the move upwards which tested marks not seen since the middle of July, the USD/BRL did reverse lower, but then began to incrementally climb again and produced a tight choppy range the remainder of the day.

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The USD/BRL remains locked within the upper tier of its mid-term price range as a general election looms in Brazil for the 2nd of October.

The USD/BRL closed for trading yesterday near the 5.3760 ratio, this after seeing a high of nearly 5.4170 when the currency pair gapped higher upon opening. After the move upwards which tested marks not seen since the middle of July, the USD/BRL did reverse lower, but then began to incrementally climb again and produced a tight choppy range the remainder of the day.

The USD/BRL hit a high of nearly 5.5100 on the 21st of July. However, by the end of August the USD/BRL was trading lower and traversing near the 5.0000 vicinity. A range largely between 5.0800 and 5.2500 was then displayed the first three weeks of September in the USD/BRL.

The U.S Federal Reserve and the Brazilian Presidential Vote are Factors in the USD/BRL

While the USD/BRL was certainly affected by the rhetoric of the U.S Federal Reserve interest rate banter last week, the upcoming general election in Brazil which will be held this Sunday is also likely having an effect. A clear winner for President is very unlikely, and another election will have to be held the last Sunday of October, and the lack of clarity in Brazilian politics is certainly causing financial houses to worry.

This coming Sunday’s election is likely to be followed by another election on the 30th of October in order to decide who will become President of Brazil, this because a mandate over 50% is needed to win.The bullish trend of the USD/BRL in the past week has been sustained and highs are now within shouting distance of values seen in July.

Speculative Bulls need to be Careful as Potential Volatility Lurks for the USD/BRL

The ability of the USD/BRL to climb the past week has been strong. Only one week ago the USD/BRL was trading near the 5.1000 ratio. This morning the USD/BRL will likely open near highs around the 5.3700 to 5.3800 ratios and if the price of the currency pair is sustained, this could signal additional buying pressure will mount in the near term.

With the general election being held this weekend, nervous sentiment in financial houses will likely increase and this could cause volatility today and tomorrow. It would not be farfetched to think traders may lean towards purchasing the USD/BRL as a safe haven to guard against the potential of a perceived negative result in the vote this Sunday from Brazil.

Traders who want to wager on long positions should be careful and they may want to be strict short term traders. Following this Sunday’s election result, there is a potential for big gaps when trading next week begins which could be dangerous.