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Market Analysis

Technical analysis of EURTRY

September 23, 2019
BY Michael Stark

The four-hour chart of the euro against the lira (EURTRY) is notable for the absence of any large movements over the past few weeks. This symbol has typically been one of the fastest moving forex pairs since last year’s crisis in the Turkish economy. Overall we can observe a sideways movement in the aftermath of losses at the end of August.

The key support on this timeframe is the area of 6.205. This seems to be quite a strong support from which price would probably bounce if there was an attempt to test the zone in the near future. High resistance might be the important psychological area of 6.50. However, 6.38 will probably be more important for this week at least.

Technical indicators on EURTRY H4

Our usual combination of 20 (from Bands), 50, 100 and 200-period simple moving averages indicates sideways movement. All of the MAs are bunched close to each other and to price. The narrowing of Bollinger Bands (20, 0, 2) since the first half of September backs up the picture of a sideways trend. In this situation, one might look to true technical indicators for clearer signals.

The slow stochastic (15, 5, 5) is within the overbought zone. Both the main and signal lines moved into overbought at the end of last week. At the time of writing, though, the main line has yet to cross below the signal line. This means that traders should probably wait for this signal before entering a selling position based on overbought conditions.

MACD (12, 30, 9) on the other hand suggests a lack of momentum like moving averages. The signal line and the histogram are both very close to zero. On the whole, indicators give us a picture of consolidation.

Price action and Fibonacci

A number of dojis and near-dojis since last week also concurs with the picture of inactivity from indicators. Conversely, the current period might result in an engulfing pattern. If this candlestick closes with a small or minimal tail, a further downward movement might result. Nonetheless, confirmation would come from the end of the period.

Fibonacci retracement here is based on the latest downward movement in late August. The extension is this plus the retracement in early September. The 38.2% retracement is probably the most important area of resistance: this might function as the upper boundary of a horizontal channel if no breakout occurs. We can also point to the 23.6% retracement as being worth watching. This area appears to be a weaker resistance which price has been testing this morning.

Key data points

Germany will release two important figures this week:

  • Tuesday 24 September, 8.00 GMT: Ifo Business Climate
  • Thursday 26 September, 6.00 GMT: GfK Consumer Confidence

EURTRY’s fairly strong reaction to this morning’s manufacturing PMI from Germany probably means that these two upcoming releases should be monitored carefully.

Technical analysis EURTRY: summary

Overall, the most likely scenario for euro-lira on this timeframe is more sideways movement for the next few days. A breakout downward is possible but not very likely based on the technical picture currently.

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