In the first half of August, we saw the Turkish lira devaluating sharply against other major currencies, which led USD/TRY to explode to the upside. But after the pair peaked for the second time on the 30th of August, it has been on a gradual decline since then. USD/TRY continues to trade below the medium-term downside resistance line drawn from the peak of the 12th of August. As long as it remains intact, we will aim for lower levels.
Currently, USD/TRY is testing one of its key support levels near the 5.515 barrier, marked by the low of the 18th of October. A break and a close below that level on the daily chart could increase the chances for the pair to travel further south, a t least towards the 5.180 zone, which is near the low of the 7th of August. This is the area where the rate could stall for a bit as USD/TRY would also test the 200-EMA. Of course, at some point, we could see a bit of correction coming in that could bring the pair higher to test the aforementioned downside line again. If the bears remain in control, the pair could continue its slide, also confirming lower highs, and a break below the 5.515 hurdle could open the path towards the 4.940 obstacle, marked by the high of 24th of July.
If, on the other hand, the previously mentioned downside resistance line does not hold and USD/TRY breaks higher, this would be the first warning signal for the bears. If they are not able to maintain their control over the pair and it shifts above 5.900, the level marked slightly above the high of the 23rd of October and which also acted as support on the 1st of October, then we could start targeting higher levels again that were last seen in the first half of October. The next potential resistance area to watch out for could be the 6.225 hurdle, which was the high of the 4th of October. A further acceleration of the rate could lead towards a test of the 6.455 barrier, marked by the high of the 18th of September.
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