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IronFX Essential Intraday Comment | 19/08/2015 USD/TRY

• The dollar traded lower or unchanged against most of its G10 peers during the European morning Wednesday, ahead of the US CPI for July. Expectations are for the headline figure to rise from the previous month, therefore, any negative surprises could weaken USD a lot. The greenback was lower against AUD, CHF and CAD, in that order, while it was higher only against NOK.

• The Turkish lira continued its freefall despite the country’s central bank left all interest rates unchanged on Tuesday. The political instability following the failure by the long-governing AKP party to create a coalition alliance, paved the way for new elections. With all the possibilities exhausted to form the new government before an August 23 deadline, the Turkish PM has formally given up the efforts to create an alliance. Turkey is now facing snap elections in few months and its entering risky political territory. The political uncertainty adds to the country’s ongoing turmoil as it battles Islamic State insurgents on its borders and Kurdish militants at home. As such, we would expect USD/TRY to rise further as we head into the snap election, and could test the psychological 3.00 level in the near future.

USD/TRY continued its surge on Tuesday, printing a new all-time high slightly above the 2.9000 (R1) resistance barrier. Today, the rate has been trading in a quiet mode slightly below that hurdle. The price structure on the 4-hour chart suggests an uptrend and therefore, I would expect a clear move above 2.9000 (R1) too set the stage for extensions towards the psychological area of 3.0000 (R2). Looking at our short-term momentum indicators though, I see signs that a downside corrective move could be in the works before the bulls shoot again. The RSI stands within its above-70 territory, but turned down, while the MACD has topped and could fall below its trigger line any time soon. On the daily chart, USD/TRY has been printing higher peaks and higher troughs above the 200-day moving average since July 2014. As a result, I would consider the major path to be to the upside as well.

• Support: 2.8650 (S1), 2.8400 (S2), 2.8220 (S3)

• Resistance: 2.9000 (R1), 3.0000 (R2), 3.1000 (R3)

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