Forex Market: USD/BRL daily trading forecast

Yesterday’s trade saw USD/BRL within the range of 2.5604-2.6092. The pair closed at 2.5890, gaining 0.88% on a daily basis.

At 9:51 GMT today USD/BRL was unchanged for the day to trade at 2.5889. The pair touched a daily high at 2.5899 at 7:35 GMT.

Fundamentals

United States

Retail Sales

Retail sales in the United States probably increased 0.2% in October on a monthly basis, according to the median forecast by experts. In September retail sales fell 0.3%, which has been the first drop in eight months, as consumers cut their spending at gasoline stations and motor vehicle stores. Retail sales in clothing stores marked the highest drop rate in September, 1.2%, followed by building material and garden equipment dealers (-1.1%) and gasoline stations (-0.8%). Sales of motor vehicles decreased 0.8% in September, after a 1.9% gain in August.

Annualized retail sales climbed 4.3% in September, following a 5.0% gain in August.

The report on retail sales reflects the dollar value of merchandise sold within the retail trade by taking a sampling of companies, operating in the sector of selling physical end products to consumers. The retail sales report encompasses both fixed point-of-sale businesses and non-store retailers, such as mail catalogs and vending machines. US Census Bureau, which is a part of the Department of Commerce, surveys about 5 000 companies of all sizes, from huge retailers such as Wal-Mart to independent small family firms.

US core retail sales, or retail sales ex autos, probably rose 0.2% in October compared to a month ago, following a 0.2% drop in September. This indicator removes large ticket prices and historical seasonality of automobile sales.

The retail sales index is considered as a coincident indicator, thus, it reflects the current state of the economy. It is also considered a pre-inflationary indicator, which investors can use in order to reassess the probability of an interest rate hike or cut by the Federal Reserve Bank. In addition, this indicator provides key information regarding consumer spending trends. Consumer expenditures, on the other hand, account for almost two-thirds of nation’s overall Gross Domestic Product. Therefore, a larger-than-expected increase in sales would certainly boost the US dollar. The official report is due out at 13:30 GMT.

Reuters/Michigan Confidence – preliminary

The monthly survey by Thomson Reuters and the University of Michigan may show that consumer confidence in the United States continued to improve in November. The preliminary reading of the corresponding index, which usually comes out two weeks ahead of the final data, probably rose to 87.5 during the current month from a final value of 86.9 in October. The latter has been the highest index value since July 2007. The survey encompasses about 500 respondents throughout the country. The index is comprised by two major components, a gauge of current conditions and a gauge of expectations. The current conditions index is based on the answers to two standard questions, while the index of expectations is based on three standard questions. All five questions have an equal weight in determining the value of the overall index.

The sub-index of current economic conditions decreased to 98.3 from a preliminary reading of 98.9 in October, after being at 98.9 in September. The sub-index of consumer expectations came in at a reading of 79.6, improving from a preliminary value of 78.4 in October, and also up from 75.4, registered in September.

In case the gauge of consumer sentiment showed a larger improvement than projected, this would boost demand for the greenback. The preliminary reading is due out at 14:55 GMT.

Brazil

Retail Sales

Annualized retail sales in Brazil probably rose at a pace of 0.1% in September, according to the median estimate by experts, following a 1.1% plunge in August. The latter has been the largest annual drop since March. In monthly terms, sales probably increased 0.3% in September, after a 1.1% climb in the prior month. This indicator reflects the change in the total value of inflation-adjusted sales by retailers in the country and provides key information regarding consumer spending trend in a shorter term, while the latter is a key driving force behind economic growth. Therefore, a higher than expected rate of increase in sales usually has a positive effect on the local currency.

Retail sales in Brazil climbed at a record-high annualized rate of 15.7% during March 2010.

Instituto Brasileiro de Geografia e Estatística (IBGE) is scheduled to release the official numbers at 11:00 GMT.

Pivot Points

According to Binary Tribune’s daily analysis, the central pivot point for the pair is at 2.5862. In case USD/BRL manages to breach the first resistance level at 2.6120, it will probably continue up to test 2.6350. In case the second key resistance is broken, the pair will probably attempt to advance to 2.6608.

If USD/BRL manages to breach the first key support at 2.5632, it will probably continue to slide and test 2.5374. With this second key support broken, the movement to the downside will probably continue to 2.5144.

The mid-Pivot levels for today are as follows: M1 – 2.5259, M2 – 2.5503, M3 – 2.5747, M4 – 2.5991, M5 – 2.6235, M6 – 2.6479.

In weekly terms, the central pivot point is at 2.5338. The three key resistance levels are as follows: R1 – 2.6146, R2 – 2.6704, R3 – 2.7512. The three key support levels are: S1 – 2.4780, S2 – 2.3972, S3 – 2.3414.