Since the sharp Turkish lira devaluation against the US dollar, which we saw in the mid-August, USD/TRY managed to stabilise and minimise its volatility. Now the pair is trading in a very calm manner, but the question is for how long? Looking at the 4-hour chart, USD/TRY continues to slowly slope lower, but without breaking the strong support area between the 5.9630 and 6.0100 levels. This area remains intact since around the 19th of August up until the present day. In a way, the pair has formed a descending triangle, which according to TA textbooks, has a tendency to break through the lower side of it. That said, until that happens, we will take a flat stance for now.
If, eventually, the break of the abovementioned support area happens, we could expect more bears to join in, as they could see this as a good opportunity to take advantage of the situation and drive USD/TRY down to test the 5.6797 hurdle, marked by the low of the 16th of August. Another break below that hurdle could set the stage for a possible move towards the 5.4230 obstacle, which was last time seen acting as a strong resistance on the 6th of August.
On the upside, if USD/TRY decides to ignore the textbook theory and rushes through the downside resistance line (the upper side of the descending triangle), then we could expect more buyers to come into play, who could lift the pair towards the levels last seen in the beginning of September. For us to get comfortable with the upside scenario, at least for the near-term, we would need to see USD/TRY closing above the 6.3710 line, which acted as good resistance on the 20th of September and good support on the 7th of the same month. Only then we could start examining a possibility for the pair to travel higher. The next good area of resistance to keep an eye on could be the 6.5470 zone, marked by the peak of the 13th of September. If the bulls remain in power, USD/TRY could end up reaching the 6.8300 barrier, which held the pair down on the 30th of August.
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