USD/TRY Threatens Long-Term Falling Wedge Formation

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Moody’s Lowers Turkey’s Rating from Stable as Lira Declines

The US Dollar (USD) fell against the Turkish Lira (TRY) yesterday, for the ninth day in a row dragging the USD/TRY to less than 2.0900. The pair however found support around the 200 Simple Moving Average (SMA) and retraced some of the losses on Wednesday. The market sentiment remains bearish due to Lower High (LH) in the previous wave.

Technical Analysis

As of this writing, the pair is being traded near 2.09300. A hurdle may be noted around 2.1022, the intraday high of yesterday ahead of the channel resistance as demonstrated in the following chart. A break and daily closing above the trendline will push the pair into positive territory, opening doors for 2.2362 that is the 50% fib level. 

On the downside, the pair is likely to find a support around 2.0873 which is the confluence of 200 Simple Moving Average (SMA) and swing low of the previous wave ahead of the channel support. A bearish breakout through the channel support shall spur renewed selling interest, exposing the fresh multi-month low below the 2.0400 handle.

Retail Sales

The retail sales in Turkey rose by just 3.3% in March as compared to 7.0% in the same month of the year before, Turkish Statistical Institute (TSI) revealed on Wednesday. The report missed the median projection of 8.08% increase by a long shot, inciting bullish momentum in USD/TRY. Generally speaking, higher retail sales are considered good for the economy.

Industrial Production

The statistics department of Turkey will release the industrial production report on Thursday. According to the average forecast of various analysts, the industrial production in Turkey declined by 3.83% in March as compared to 4.9% in the same month of the year before, better than expected actual outcome will be considered bearish for USD/TRY and vice versa.

Current Account

The Central Bank of the Republic of Turkey will release the current account balance on Tuesday. According to the median forecast of economists, the trade deficit increased to $3.60 billion in March as compared to $3.19 billion in the month before, worse than expected actual outcome will be considered bullish for USD/TRY and vice versa.

US Retail Sales

The Census Bureau of the US is due to release the retail sales report on Tuesday. According to the forecast of analysts, the sales increased by 1.37% during April compared with 3.8% in the same month of the year before, better than expected actual outcome will be considered bullish for USD/TRY and vice versa.

Trade Ideas

Considering the growth optimism of the US and a wide range of challenges faced by the Turkish economy, buying the pair around the long term channel support appears to be a good strategy; the trade should however be stopped out on a daily closing below the trendline.

To contact the writer of this story: Usman Ahmed at usman@forexminute.com