Technical Analysis USD/TRY : 2019-07-23
IFC Markets | Jul 24, 2019 12:51AM ET
Getting ready for the meeting of the Central Bank of Turkey
On July 25, 2019, the next meeting of the Central Bank of Turkey will be held, at which the rate may be reduced. Will the Turkish lira rate continue weakening?
On the USD/TRY chart, the weakening of the lira looks like a rise. The main rate of the Central Bank of Turkey is considered a week repo. Now its rate is 24%. It has been operating since last September. The rate of the Turkish central bank is significantly higher than inflation, which amounted to 15.72% in June in annual terms. Accordingly, some participants in the foreign exchange market expect a rate cut on Thursday at 11-00 GMT. Moreover, the spread of the rate reduction is very large, from 23.75% to 21.25% already at the end of this meeting. A number of investors believe that the rate will continue to decline at the September and October meetings of the Central Bank of Turkey and eventually drop to 17.5%. Theoretically, this may contribute to the weakening of the Turkish lira.
On the daily timeframe USD/TRY: D1 is in a downtrend, but the decline slowed down and various technical analysis indicators formed signals to increase. The chart failed three times to break down the 200-day moving average line. Correction to the top and further growth of quotations is possible in case of an aggressive reduction in the rate of the Central Bank of Turkey.
- The Parabolic indicator shows a signal to increase.
- The Bolinger bands® narrowed, indicating a volatility decrease.
- The RSI indicator is below 50. It has formed a divergence to increase.
- The MACD indicator gives a bullish signal.
The bullish momentum may develop if USD/TRY exceeds the last two upper fractals: 5.78. This level can be used as an entry point. The initial stop lose may be placed below the last two lower fractals, the Parabolic signal and the 200-day moving average line: 5.56. After the opening of a pending order, stop shall be moved following the signals of Bollinger and Parabolic to the next fractal minimum. Thus, we are changing the potential profit/loss to the breakeven point. More risk-averse traders may switch to the 4-hour chart after the trade and place a stop-loss moving it in the direction of the trade. If the price meets the stop level (5,56) without reaching the order (5,78), we recommend to cancel the order: the market sustains internal changes that were not taken into account.
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Technical Analysis Summary
Position Buy Buy stop Above 5,78 Stop loss Below 5,56
Market Overview
US stocks edge higher
Dollar strengthening decelerates
US stock market resumed advancing on Monday led by technology shares. The S&P 500 gained 0.3% to 2985.03. Dow Jones industrial added 0.1% to 27171.9. The Nasdaq composite rose 0.7% to 8204.14. The dollar strengthening decelerated: the live dollar index data show the ICE (NYSE:ICE) US Dollar index, a measure of the dollar’s strength against a basket of six rival currencies, added 0.2% to 97.28 and is higher currently. Stock index futures point to higher market openings today
CAC 40 outperforms European indexes
European stocks ended little changed on Monday as companies reported mixed quarterly results. Both GBP/USD and EUR/USD continued their slides and are down currently as European Union trade official said EU sought to work with Washington to reform the World Trade Organization and cooperate on common challenges to global trade, but will retaliate if Washington makes good on its threat to raise car tariffs. The Stoxx Europe 600 index ended flat. The DAX 30 added 0.2% to 12289.40. France’s CAC 40 rose 0.3% and UK’s FTSE 100 edged up 0.1% to 7514.93.
Nikkei leads Asian indexes rebound
Asian stock indices are recovering today after reports U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin would travel to Beijing next week to resume trade negotiations with China. Nikkei closed 1% higher at 21620.88 as yen slide accelerated against the dollar. Markets in China are rising buoyed also by news President Donald Trump had agreed to make “timely” licensing decisions for U.S. tech companies seeking to renew sales with Huawei: the Shanghai Composite Index is up 0.4% while Hong Kong’s Hang Seng Index is 0.2% higher. Australia’s All Ordinaries Index rebounded 0.5% as Australian dollar continued its slide against the greenback.
Brent rising
Brent futures prices are edging higher today as traders watch for developments in the Strait of Hormuz after Iran seized a British tanker last week. Prices rose yesterday: September Brent crude gained 1.3% to $63.26 a barrel on Monday.
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