Forex Market: USD/BRL daily trading forecast

Friday’s trade saw USD/BRL within the range of 2.2839 – 2.2655. The pair closed at 2.2778, gaining 0.40% on a daily basis. At 9:22 GMT today USD/BRL was up 0.03% for the day to trade at 2.2778.

Fundamental view

A preliminary gauge prepared by Markit Economics is expected to show later today that activity in US services sector probably slowed down in August, with the corresponding preliminary Purchasing Managers’ Index coming in at a reading of 59.5, according to the median forecast by analysts. In July, the PMI stood at 60.8. The index is based on a monthly survey, encompassing 400 business entities, operating in the services sector. Respondents give their estimate in regard to business conditions – sales, employment, inventories, prices. Values above the key level of 50.0 indicate optimism (expanding activity). As services comprise a dominant part of nation’s GDP, the performance of this indicator is of key importance for overall economic development assessment. Higher PMI readings would support the national currency. The preliminary data by Markit Economics is due out at 13:45 GMT on Monday.

Sales of new single-family houses in the United States probably reached the seasonally adjusted annualized level of 430 000 in July, following a level of 406 000 units in June, while the latter was 8.1% lower compared to that in May. The median sales price of new houses sold in June was $273 500, while the average sales price was $331 400. The seasonally adjusted estimate of new houses for sale at the end of June was 197 000, which represents a supply of 5.8 months at the current rate of sales.

The report on new home sales has a considerable impact on financial markets, as new home sales can trigger a rise in consumption. It is also an excellent indicator of any economic downturns or upturns due to the sensitivity of consumer income. For example, when new home sales drop over several months, this usually is a precursor to an economic depression.

However, there are several points to watch out for, when interpreting the New Home Sales numbers. First, the statistics do not record any houses that are not going to be sold immediately. For example, the case, when a house is commissioned to be built on an existing plot of land that the purchaser owns.

Second, the statistics are taken at the point, where a customer has signed a sales contract or has put a deposit down. At this point, the house can be at any stage of construction.

Third, the sales figures are not adjusted to take into account sales contracts, which are eventually canceled by the builder or the customer. However, the same house is not included in any subsequent count, when it is eventually sold to another customer.

Higher than expected rate of increase in the new home sales index is usually dollar positive. The Census Bureau is scheduled to publish the official data at 14:00 GMT on Monday.

Brazil

At 11:00 GMT Fundação Getulio Vargas will release its consumer confidence index. The FGV Consumer Confidence index is based on surveys conducted among citizens rating their opinion about the current economic conditions, as well as future expectations. The survey yields indicators about consumer sentiment, covering pointers to the short-term path of the economy, evaluations and expectations about the economic situation, decisions about saving accounts and future expenses, work prospects, the financial situation of the family, intention of purchasing durable goods.

The FGV Consumer Confidence is expected to come in at 105.00 from 106.90 a month earlier. Rising values, especially better-than-expected ones, are considered bullish for the Brazil real, and vice versa.

Additionally, the Instituto Brasileiro de Geografia e Estatisticais will release Brazils July unemployment rate on Tuesday. In June the rate was 4.9%. It represents the percentage of the eligible work force that is unemployed, but is actively seeking employment in six Metropolitan Areas – Recife, Salvador, Belo Horizonte, Rio de Janeiro, São Paulo and Porto Alegre.

The rate of unemployment also reflects overall economic state in the country, as there is a strong correlation between consumer spending levels and labor market conditions. High rates of unemployment are accompanied by weaker spending, which causes an adverse effect on corporate profits and also leads to overall growth deceleration. Therefore, in case the rate of unemployment rises more than expected, this would have a negative effect on the local currency.

Technical view

According to Binary Tribune’s daily analysis, the central pivot point for the pair is at 2.2757. In case USD/BRL manages to breach the first resistance level at 2.2860, it will probably continue up to test 2.2941. In case the second key resistance is broken, the pair will probably attempt to advance to 2.3044.

If USD/BRL manages to breach the first key support at 2.2676, it will probably continue to slide and test 2.2573. With this second key support broken, movement to the downside will probably continue to 2.2492.

The mid-Pivot levels for today are as follows: M1 – 2.2533, M2 – 2.2625, M3 – 2.2717, M4 – 2.2809, M5 – 2.2901, M6 – 2.2993.

In weekly terms, the central pivot point is at 2.2692. The three key resistance levels are as follows: R1 – 2.2925, R2 – 2.3071, R3 – 2.3304. The three key support levels are: S1 – 2.2546, S2 – 2.2313, S3 – 2.2167.