A possible settlement of the situation in Syria may strengthen the Turkish lira
Turkey and Syria may reach an agreement on the settlement of the political situation in the Middle East. Is there a possibility for the Turkish lira to strengthen against the euro and for EURTRY quotes to decrease?
Additional positive factors for the Turkish lira may be the decrease in inflation in January to 10.35% in annual terms from 11.92% in December and the growth of industrial production in December. It is also expected that on Friday S&P will preserve the Turkey credit rating in foreign currency at the current level of ВВ, despite the “negative” forecast. Note that Turkish GDP grew by 11.1% in the Q3 of 2017, which was the maximum increase in 6 years. The Q4 data will be published on March 29, 2018. In turn, last week the euro showed the 2nd maximum weekly decline in recent 4 months. The main reasons were the political risks around the voting on the formation of the governing coalition between the main parties of Germany. The voting took place on February 20, 2018, and its results will be announced on March 4, 2018. If the inter-party coalition is not created, Germany may again remain without a single government. On Wednesday, February 28, 2018, important data on inflation for February, which may affect the euro dynamics, will be released in the eurozone.
On the daily timeframe, EURTRY: D1 is trying to form a double top near its historic high. It is still in the rising trend but the growth has slowed down and some technical analysis indicators have formed Sell signals. To open a Sell position, the support line of the rising trend needs to be breached down. The further price decrease is possible in case of the publication of positive political news in Turkey and Syria, as well as negative economic news in the eurozone.
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- The Parabolic indicator gives a bearish signal.
- The Bollinger bands have narrowed, which means lower volatility. They are tilted down.
- The RSI indicator is below 50. It has formed a negative divergence.
- The MACD indicator gives a bearish signal.
The bearish momentum may develop in case EURTRY drops below the lower Bollinger band at 4.614. This level may serve as an entry point. The initial stop loss may be placed above the last fractal high, the historic high, the upper Bollinger band and the Parabolic signal at 4.74. After opening the pending order, we shall move the stop to the next fractal high following the Bollinger and Parabolic signals. 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 there a stop loss moving it in the direction of the trade. If the price meets the stop level at 4.74 without reaching the order at 4.614, we recommend cancelling the position: the market sustains internal changes that were not taken into account.
Summary of technical analysis
|Sell stop||below 4,614|
|Stop loss||above 4,74|
Market Analysis provided by IFCMarkets