Traders Should be Ready When and If USD/TRY Makes New Highs

Traders should have a plan to act, however also make sure to stick to the plan!

FOREX 4

As Emerging Market currencies (EMs) have been putting in all-time lows versus the US Dollar since the spread of the coronavirus in late February, one currency that has yet to do so is the Turkish Lira.  However, it’s not because the Turkish Lira is doing so much better than other Emerging Market pairs, but rather it’s because of a spike in the currency back in early August 2018 when the price of the USD/TRY moved from roughly 5.00 to 7.0831.  EM currency pairs vs the US Dollar had slowly been moving lower at that time, as the US was raising interest rates.  However, the last straw was when US President Trump slapped tariffs on Turkish imports of steel and aluminum and the pair spiked higher.

The Turkish Lira had recovered those losses by  November of 2018; however, USD/TRY is now just a stone throw away from those prior highs, currently trading near 7.0450. 

Source:  Tradingview, FOREX.com

On a 240-timeframe, USD/TRY has been trading in an upward sloping channel since the beginning of March. The RSI is clearly diverging from price on both the daily and the shorter timeframe. 

Source:  Tradingview, FOREX.com

Traders need to be ready in case price does move to new highs, and make sure they are asking the right questions, such as:

  • “Where are the obvious stops?”
  •  “What happens after price breaks through previous highs?”
  • “Will price take out stops and continue higher?”
  •  “Will sellers come in after the stops are taken out and push price lower after new longs entered the market on a break of the highs?”
  • “Will sellers hold price below the highs?
  • “Where do I get out if I’m wrong?”

Buyers will enter the market on the break to a new high with stops underneath it, especially with room to move to the top of the channel near 7.20 and an RSI that is back under 70.  Sellers will short the new highs, presumable after a stop hunt, and place stops above looking for a move back to the bottom  of the channel.  That should move the RSI back into overbought territory and sellers will be looking for it to turn lower.  First horizontal support is below at 7.008, and then trendline support from the channel near 6.92.  There are additional horizontal support levels below the channel.  Also, depending on where the actual high is, one can draw Fibonacci retracement levels to determine other support levels.

When and if USD/TRY makes new highs, traders must be ready.  There is likely to be some volatility around those high.  Traders should have a plan to act, however also make sure to stick to the plan!


Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.