Greenback Turns Weak after Poor NFP and Trade Balance Data

US DollarThe Rial currency of Brazil plunged against the Greenback in the middle of May this year when a local newspaper reported that President Michel Temer asked the chairman of meatpacking giant JBS SA Joesley Batista for continuing to pay former legislator Eduardo Cunha who is currently serving his time in prison for corruption and money laundering.

Doubts were created about the ability of the government of Brazil after the news for implementing vital economic reforms.

This, in turn, has bolstered the currency pair USD/BRL to a high figure of 3.4068 from the earlier closing figure of 3.1254.

However, as explained below, the recent economic data indicates that Brazilian economy is recovering and making a comeback. Hence, the USD/BRL currency pair is likely to be in the bearish zone.

Financial Times

For the first time in the past two years, the economy of Brazil has expanded by 1% on quarter-on-quarter in Q1 of 2017, and it is all because of a strong rise in exports. The growth in GDP was at par with expectations. The Brazilian economy contracted by 0.5% in last quarter.

In May, a record surplus of $7.66 billion was posted by Brazil which is up by 19% from $6.437 billion in 2016 and is also at par with the estimates of the analysts. The increase in trade surplus was primarily due to record soy harvesting. Brazil has made a record surplus of $29 billion in the first five months of this year.

On the other hand, a report from US Bureau of Economic Analysis stated that trade deficit has widened in April to $47.6 billion from $45.3 billion earlier this month. On an average, the analysts speculate the trade deficit to be $45.5 billion.

The US Bureau of Labor Statistics on Friday reported that 138,000 non-farming jobs had been added in May which is down from 174,000 jobs last month and lower than the consensus estimates of 181,000. Similarly, there is a 0.2% increase in the average hourly wages on the month-on-month basis in May. The reports from NFP or Non-Farm Payroll have increased doubts about the possibility of raising the benchmark interest rates thrice this year. Hence, economic data supports correction in currency pair USD/BRL in the short term.

The currency pair USD/BRL has broken the resistance level of 3.2810 which is clear from the chart below. There is a decline in DeMarker oscillator after reaching a reading of 0.7. This shows exhaustion in the currency pair. Hence, we can expect the pair to close the technical price gap soon.

USD/BRL Pair: June 5th 2017

USD/BRL Pair: June 5th, 2017

We recommend all the traders to take advantage of the impending downtrend by going short in currency pair at 3.2520 level. A STOP ORDER needs to be placed above 3.2810 for attaining a comfortable risk-reward ratio. Profits can be taken near 3.1300 which is a significant support level.

A PUT Option contract needs to be bought from a reputed Binary Options broker to benefit from the likely decline of USD/BRL. It is recommended to invest when the pair is trading around 3.2520 and set an expiry trade of 7 days.

Rich Archer

Rich Archer

Hi, my name is Rich Archer. I am living in London. Welcome to Binary Manual. Reach to Binary Options broker reviews and market news here.

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