Protests, Interventions, and Goals are Sparking Concerns that Tough Times for Brazil are real.

Brazilian Real

It was just over a year ago that Brazil’s economy was touted as one of the best emerging markets to invest in. On the currency front, if any attempt was going to be made for a South American united currency, the Brazilian real was going to be the key economy, just like Germany is for the euro. The World Cup was also viewed as an amazing opportunity to bring much tourism and further economic growth to the region.
Brazil now has 6.5% inflation for the last year through May. The economy heated up too quickly and the real has depreciated over 20% from the start of 2012. Protesters are stealing the headlines as their demands for lower transportation costs and rising costs that have come for the preparation for the World Cup.
Last week the real plummet to its worst level in four years and the decline could not be slowed down by government intervention. Risk-off hurt the currency as concerns grew that the Chinese weakness remains and that Fed could be removing stimulus sooner than many have expected.
Price action on the US Dollar/ Brazilian Real daily chart is trending higher after finally breaking out above of the 2.15 region. Currently, price is tentatively respecting a potential bearish ABCD. If valid, we may see a tentative pullback towards the 2.20 area.
If price has two daily closes above the 2.2682 level, which is the 161.8% expansion level of the 2012 high to this year’s low move, the bearish ABCD pattern is invalidated and we may price attempt to recapture the 2.50 level.

USDBRL Daily chart june 23

Edward J. Moya is the Chief Market Strategist for edmoya.com, an educational website for foreign exchange and commodity traders. He has over 15 years of investment industry experience in forex, stocks, options and futures. At edmoya.com, Mr. Moya writes daily currency and commodity analysis and has authored numerous articles on trading using both technical and fundamental analysis for major financial publications. He is a contributor of technical and fundamental analysis in currencies and commodities to SFO, Market News International, and Forex Factory.

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