Emerging market currencies (BRICS)
The Brazilian Real (BRL), Russian Ruble (RUB), Indian Rupee INR) and South African Rand (ZAR), collectively known as the emerging market BRICS currencies are currently presenting interesting trade setups at present.
The following looks at the BRICS pairings against the dollar with a technical focus highlighting:
- USD/BRL testing range resistance
- USD/RUB short term pullback in long term uptrend
- USD/INR short term consolidation within long term downtrend
- USD/CNH short term continuation of longer term downtrend
- USD/ZAR bearish reversal mid-range
USD/BRL testing range resistance
The USD/BRL has been trading within a range between levels 5.21 (support) and 5.66 (resistance). The currency pair is currently testing the resistance of this range.
Breakout scenario
A close above the 5.66 resistance level would suggest further gains, with the next resistance target considered at 5.90. In the event of a breakout, traders might use a close below support at 5.55 as a stop loss consideration.
Range trade scenario
Alternatively, failure to close above range resistance, might consider a new range trade opportunity. For this scenario we would like to see a bearish price reversal with a close below 5.55. Should this occur, 5.21 would become the downside support target, while a close above 5.66 might be used as a stop loss consideration for the short trade.
USD/RUB possible pullback from uptrend
The USD/RUB has been trading within an upward channel and trend. After a break of the upper channel resistance line, circled red we see a bearish price reversal pattern forming. The reversal pattern is supported by an overbought signal.
The price reversal and overbought signal suggest a short term pullback may be ensuing. Should the pullback ensue, trend followers might look for long entry on a move back towards support between levels 75.95 and 76.60 respectively.
USD/INR short term consolidation within a down trend
The USD/INR currently trades within a longer term downtrend. In the short term we have seen the price moving into a triangle shaped consolidation. Triangles are considered continuation patterns in technical analysis terms, meaning that they are often a precursor to the preceding trend being continued. In the current context, the preceding trend is down.
Traders of the trend and pattern might wait for a close below triangle support, before targeting a move towards the lows at 73.38 and 72.93 respectively. In this scenario a close above 74.25 might be used as a stop loss consideration for the trade. Traders would need to assess whether the risk relative to reward is favourable enough before embarking on such a trade.
For a renewed uptrend bias to be considered we would instead like to see the currency pair trading back above the 74.70 level.
USD/CNY
The long term trend for the USD/CNH is considered down. In the short term we see the price rising slowly counter trend. The highlighted area on our chart shows this counter trend move which resembles a bear flag consolidation. A bear flag suggests that the longer term downtrend may be continued. Traders of the trend and flag pattern might look for a short positioning on a bearish price reversal before the 6.85 resistance level (just occurred), or on a break of flag support (currently underway). A move back to test the lows at 6.74 is targeted, while a close above 6.85 would indicate the bearish assumptions to have failed.
USD/ZAR bearish reversal mid-range
The USD/ZAR has formed a bearish price reversal mid-range at around the 17.15 level. While we prefer to trade from the outskirts of the broader range (at levels 16.35 and 17.80), aggressive traders might consider the current bearish reversal a short opportunity, targeting a move towards support at 16.35, while using a close above 17.15 as a stop loss consideration for the trade.
This information has been prepared by IG, a trading name of IG Markets Ltd and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
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