Patternseeker
Short

BRL struggling right now. Next weeks are critical.

FX_IDC:USDBRL   U.S. Dollar / Brazilian Real
All necessary information is on the chart.

Following last years elections results BRL recovered against the US dollar , but despite a series of positive indicators, reports and overall better economical mood BRL failed to follow towards the target of the previous head and shoulders pattern, instead, encouraged by yet another corruption scandal, the price has been hiking strong, and has the potential to trigger a massive cup and handle pattern. Such a massive loss of value is not unheard of in South America, and has as a matter o fact befallen a neighboring country - Argentina - a few years ago.
Comment: So far BRL printed a higher low but failed to make a higher high. On the medium term there appears to be a rising channel - the bottom trend-line of the channel has been tested many times and it has been very supportive so far. On the higher end, right now BRL is printing a double top at 4.009 but finding some support at 3.91

Scenarios are as follow:

Bullish for BRL:
If the immediate support at 3.91 breaks, the bottom of the channel will be tested.
If the bottom of the channel breaks we are likely to revisit 3.6 with the potential to continue towards the Head and Shoulders pattern.

Bearish for BRL:
If the resistance at 4.009 breaks we are very likely to test the top of the channel and possibly the ATH.
Even if 4.009 does not breaks on the next week, but the bottom of the channel holds again, we are likely testing 4 and breaking it on following week

The 4.009 lvl is very important and strong, as it was the previous ATH from 2002.
If BRL breaks it and sits on it, the bigger scenario of the Cup and Handle becomes more likely

Trade accordingly for each scenario.

I favor the bearish scenario with yet another successful support of the lower channel, and would expect us to test 4.20 within the next 3 weeks.

Until there are fundamental reasons for a bullish shift, I don't expect BRL to react, but only get mitigated by Brazilian Bank intervention (Swaps)


Comment: BRL failed to break support vs USD at 3.91, apparently consolidating above it. It's now moving towards the top of the channel, next target is likely ~ 4.15 before a retest of ath. So far BRL has shown greater weakness than expected, and if it pops above the channel towards ath it could accelerate. If ath is surpassed there's no roof left and Brazil could very well face a situation like Argentina did years ago. Previous scenarios and resistance/support levels in this TA are still in play.


My thought is that is going to retest 4.25 +/- again. Just like you.
Reply
Patternseeker showerreport
@showerreport, nice one! Moving now...
Reply
Home Stock Screener Forex Screener Crypto Screener Economic Calendar How It Works Chart Features Pricing House Rules Moderators Website & Broker Solutions Widgets Charting Solutions Get Help Feature Request Blog & News FAQ Wiki Twitter
Profile Profile Settings Account and Billing Get Help Ideas Published Followers Following Private Messages Chat Sign Out