In my opinion, things look good for the Lira in the next coming weeks. So far the Euro is trending at all times high but since the monetary intervention and rate hike last week, the embattled Lira as found some support and has retraced from their current lows. If the lira is compared to other emerging currencies, then it is the most beleaguered of them all as there is a critical balance of retaining and actually meeting political demands for cheap credit while stabilizing the currency as the president wants. Unexpectedly, the Turkish central bank raised interest rates last week resulting in the two year government bonds reversing from their recent lows and forecasting times of rate hiking cycle in the coming months.
Technically, I have been waiting for the EURTRY to drop like a stone and because a double bar reversal pattern formed in the daily chart, I will be looking to initiate shorts. There is a clear build up of short positions in the weekly chart as shown by that negative slope of the OBV and the monthly chart is characterized by that long upper week meaning selling pressure. Further, there is a clear bear divergence in the daily chart as price trends higher while our momentum indicator trends lower. This gives another reason to go short.
In the 1 hour chart, there is a buy signal in formation and I shall be looking to short this temporary move up within the 3.63 and 3.64 resistance levels with my stop loss squarely placed above the recent highs at 3.67.For the daily chart traders, stop losses will be above the recent highs reached after trump election at 3.7.
So trade plan will be as follows:
Sell Limit: 3.63, 3.64
Stop Loss: 3.67 and 3.7
Take Profit: 1:3 risk reward ratio
Look to initiate shorts only when there is a sell signal printed by the stochastics at the resistance levels marked in the 1Hr chart. Have a good trading day.