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US Dollar Forecast: USD/BRL Breakout Opening Door to Selloff?

US Dollar Forecast: USD/BRL Breakout Opening Door to Selloff?

2019-10-24 00:00:00
Dimitri Zabelin, Analyst
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US Dollar Chart Analysis, Brazilian Real, USD/BRL Forecast –TALKING POINTS

  • USD/BRL has broken below lower bound of congestive zone
  • Breach with follow-through could precede aggressive selloff
  • Longer-term outlook suggests may only be short-term reversal

Learn how to use political-risk analysis in your trading strategy!

USD/BRL has been trading in a congestive zone between 4.0538-4.1935 after it broke the August uptrend and has been indecisively floating there as traders withhold directional commitment. However, the pair recently broke below the lower bound. If met with follow-through, it could fuel downside exposure and lead the pair to test July-lows at 3.7184.

USD/BRL – Daily Chart

Chart showing USD/BRL

USD/BRL chart created using TradingView

The pair will almost certainly encounter some friction along the way down, though from a technical standpoint there does not appear to be any significant barriers. The pair’s resolve will be tested at 3.7184, which, if also broken could signal a longer-term reversal of the current bullish uptrend.

Zooming out to a weekly chart shows USD/BRL has been climbing along an 11-year rising support channel. If the pair breaks below the October 2018 floor, it opens the door for the pair to test the over-decade long uptrend. Reaching this level could signal that the pair could flirt with possible major trend reversal. However, the fundamental outlook says otherwise and in fact supports a bullish case for USD/BRL.

To get more in-depth analysis of BRL and the Brazilian economy, be sure to follow me on Twitter @ZabelinDimitri.

USD/BRL – Weekly Chart

Chart showing USD/BRL

USD/BRL chart created using TradingView

US DOLLAR TRADING RESOURCES

--- Written by Dimitri Zabelin, Jr Currency Analyst for DailyFX.com

To contact Dimitri, use the comments section below or @ZabelinDimitrion Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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