BRICS currencies: trade setups for USD/BRL, USD/RUB and USD/INR

Recent volatility in emerging markets could mean new trading opportunities in BRICS currencies.

The Brazilian real (BRL), Russian ruble (RUB), Indian rupee (INR), Chinese yuan renminbi (CNH) and South African rand (ZAR) - collectively known as the emerging market BRICS currencies - have all seen a sharp weakening against the US dollar in the short term. The below is a technical trading view on these currencies in the wake of renewed dollar strength.

USD/BRL stays in range

The USD/BRL is currently trading within a range between levels 5.21 (support) and 5.66 (resistance). The currency pair has recently seen a sharp bullish reversal off the 5.21 support level. The price is now moving towards gap resistance between levels 5.51 and 5.55 respectively.

A close above the 5.55 gap resistance level would suggest further gains, with resistance at 5.66 the next upside target considered. Alternatively, failure to close above gap resistance, and in the event of a bearish price reversal around current levels, a move back towards range support at 5.21 would instead be favoured.

USD/RUB in upward channel

The USD/RUB currently trades within an upward channel and trend. The currency pair is also moving into overbought territory at present. The trend supersedes the overbought signal and trend followers would therefore consider maintaining a long bias to trades on the USD/RUB pair.

A long entry may be considered on either a pullback towards support at 74.75, or on an upside break of the high at 76.60. In this situation a move to channel resistance would be targeted, currently assumed at the 78.20 level.

USD/INR remains in downtrend

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 at roughly 73.38, before targeting a move towards the low at 72.93. Alternatively, should the price instead break to the upside of the triangle pattern, traders might prefer to look for a short position on the currency pair on a bearish reversal before trend line resistance.

Only in the event of the 74.70 resistance level being broken (with a confirmed close), would we look to reassess the short bias to trades on the USD/INR currency pair.

USD/CNH edging higher in the short term

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, or on a break of flag support. In this scenario a move back to test the lows at 6.71 would be targeted.

USD/ZAR is scrambling towards resistance

After a false break of the 16.35 support level, USD/ZAR has formed a sharp price reversal before rallying towards resistance at 17.00. A close above 17.00 would suggest further gains for the pair with the initial resistance target considered 17.50.

Should the pair instead fail to break the 17.00 level, and a bearish price reversal forms, support at 16.35 would once again be targeted.

BRICS currencies: in summary

  • The USD/BRL trades in broad range and is currently moving to test gap resistance, a break of which would call for further gains
  • The USD/RUB trades in an upward channel, suggesting a long bias to trades with entries considered on an upside breakout of pullback to support
  • The USD/INR long-term trend is down, while the short-term triangle consolidation suggests further decline to follow
  • The USD/CNH longer-term trend is down, while the short-term bear flag formation suggests further decline to follow
  • The USD/ZAR trades in a broad range and is testing resistance at 17, a break of which would consider further gains towards the 17.50 level

The information 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 Bank S.A. 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 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.

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