What Is Going On with the Turkish Lira (USDTRY)
There are two themes that I would like to discuss on this chart.
1) Breakout to all-time high levels which I like to call uncharted territory.
2) Significance of long-term chart patterns.
I’ve been following and writing about this pair for almost 2 years. I’ve been also betting on U.S. dollar strength against most of the emerging market currencies. (All updates on USD/TRY for the past 2 years)
USDTRY Dollar Turkish Lira Price Chart – Turkish Lira Crash
When price clears strong horizontal resistance which has been intact for almost a decade it usually signals a major shift in supply/demand dynamics. In the beginning of 2012, USDTRY broke above 1.75 levels. That was the major shift that pushed the cross rate above decade-long resistance. However, depreciation of the Lira didn’t start until another medium-term chart pattern (symmetrical triangle) was completed in the first quarter of 2013. Only after a decisive break above 2 levels USDTRY started moving higher towards its long-term chart pattern target at 2.7 levels.
Long-term chart pattern was a head and shoulder continuation (here is a perfect discussion on head and shoulder continuation) (@PeterLBrandt) that took almost a decade to form. Breakout from the head and shoulder continuation also pushed the USDTRY to all-time high levels. When these two important chart developments took place at the same time, it became clear that a major shift was underway.
Price targets derived from chart patterns are only reference points in our analysis. Price can exceed these levels. However, it is important to note that around 2.7 levels there are two strong resistances. 1) Upper boundary of the trend channel 2) Head and shoulder price target. Let’s keep a close eye on 2.7 resistance.
Aksel Kibar is a CMT Portfolio Manager at Invest AD (the Abu Dhabi Investment Company) United Arab Emirates Investment Management. He has more than 15 years experience in the business and is well know for his wonderful charts and trading skills. He runs the blog Tech Charts. TechCharts is a blog for technical analysis of currencies, commodities, equities and economic indicators. On this blog you’ll find several updates on different asset classes and widely followed economic indicators with different technical approaches. Bollinger bands and indicators will be frequently applied to identify short and intermediateterm opportunities. Other tools will include basic trend lines, chart patterns and moving averages.
Market Update from OctaFinance Staff:
Still we have to be careful as to what the Central bank of Turkey is ready to do to stop the USDTRY strength.
Central Bank of Turkey is preparing to support the weak Turkish lira
The Turkish currency dropped to a record low of 2.71 per dollar
Turkey’s Central Bank said Tuesday that it will consider support measures for the weak lira after the currency tumbled to a new record low against the US dollar, writes Yahoo Finance. USDTRY hit a new record low of 2.71 against the dollar, but then increased slightly after the statement from the central bank.
The Bank has taken an extremely unusual step of publishing the agenda of its next meeting on monetary policy on 22 April, which will include measures to support the lira, including a reduction of the deposit rates.
The Turkish lira, which has lost 11% of its value against the dollar since the end of January, was pressed by strong US economic data and expectations that the Federal Reserve may raise the interest rates at its next FED meeting.
William Jackson, an economist at Capital Economics in London, said that “extraordinary decision” of the bank to publish its agenda shows that they are looking for ways to tighten monetary conditions and to strengthen the pound without incurring the wrath of President Erdogan ” .
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