Forex Investment and Currency Trading

Spot 2.4930 represents the 38.2% retracement of the Oct 2002 to Aug 2008 bear market range of 4.0 to 1.5600. Levels have been bumping up against this resistance at 2.49-2.50 since early October 2008. If 2.50 does not hold, next target will be 2.78 to 2.80, the 50% retrace of the full range and support during the April 2003-April 2004 consolidation. The sharpness of the move yesterday suggests some scope for overshooting. So we could see some near-term consolidation. That said the data out of Brazil this week was particularly negative with - soft November PMI and bank lending/credit data plus FX flow data for the past week showing cumulative outflows for the month of USD7.2bn propelled by financial flows. Overall balance sheet considerations are the dominant force behind USD/BRL dynamics given sizable foreign currency redemptions coming due against the backdrop of capital and portfolio flow withdrawal.