Technical analysis of GBP-TRY

The four-hour chart of the pound against the lira shows clearly that the uptrend’s momentum has been decreasing for about a fortnight now. Click on the image to magnify. Some of the fundamental factors behind this include the recent boost in Turkish governmental spending, expedited through domestic debt, and relatively better data from the property market and on consumer confidence in Turkey. Today’s technical analysis of GBP–TRY considers where the most important short-term supports and resistances might occur.

High resistance here is likely to be the limit of the pound’s highs during 2018’s crisis in the area of ₺8.85, slightly above the top of the chart. Low support is somewhat less clear but the key psychological area of ₺8 (immediately below the bottom of the chart) will probably be important. However, a test of this latter area is unlikely anytime soon.

Technical indicators on GDP-TRY H4

Moving averages continue to print a very strong buy signal with the 50, 100 and 200 SMAs all successively above each other. The 100 SMA has extended significantly above the 200 but the 50 SMA from Bands has closed the space recently with the 100.

The first important support from moving averages is the 50 SMA which coincides with the 38.2% zone from the Fibonacci fan around ₺8.617. Below this, the 100 SMA and (eventually) the 200 will also probably be noteworthy supports, but the large value area between these might be a new range in the event of a retracement.

Bollinger Bands (50, 0, 2) have contracted significantly this week, reaching the smallest space between the deviations since the beginning of the current crisis. This reflect decreasing momentum and volatility in the present but might also signal the end of this phase of gains. Such a signal seems to be more favourable given that the slow stochastic (15, 5, 5) has moved sharply down out of overbought since Tuesday afternoon GMT. ADX (30) meanwhile at 10.5 indicates no clear trend, with the +DI and -DI yielding nearly identical readings.

Price action and Fibonacci

Recent price action confirms the impression from indicators of lower momentum and a possible retracement to come. The downward engulfing pattern in particular as the new high was reached on Tuesday would usually be taken as a strong sell signal in the short term at least on this timeframe.

However, the long tail last week and several near-dojis last night slightly above the 38.2% area of the Fibonacci fan seem to confirm this zone’s importance as a support. The fan here has been added based on the rapid upward wave on the daily charts. For many traders, a decisive break of the upper Fibonacci area would confirm that a phase of retracement will occur.