Turkey’s economy is in full recovery. The central bank reduced interest rates once again by 50 basis points, to 10.75%. Since President Erdogan’s government assumed a more direct role in monetary policy, it reduced interest rates by 1,275 basis points and promised a single digit in the second half of 2020. Economic indicators confirm the recovery, but there are still doubts about the sustainability. Debt-driven expansion can be compared to the United States, where economic indicators are contracting. With the USD / TRY trying to extend its progress with a breakout above its resistance zone, the exhausted rise.
The Strength Index, a next-generation technical indicator, initially reached a new high in 2020 before correcting its level of upward support. He was able to reverse and turn his horizontal resistance level into support, as marked by the green rectangle. While the Bulls have regained control of the USD / TRY after the thrust in positive conditions, the level of downward resistance is benefited to press the Force Index towards a recovery. The collapse of this technical indicator will precede a corrective phase in the price action.
The surprising opposite reading last week for the US service sector shocked the markets, but more data are expected to assess whether this is the beginning of a trend to monitor. The current resistance zone located between 6.11019 and 6.14431, marked by the red rectangle, was initially established in August 2018. It has forced three massive corrections in the past and, given the evolution of economic conditions in the United States and Turkey, it is anticipated that a fourth will materialize, which will lead to a breakdown in the USD / TRY.
The price action may face a potentially violent massive profit-taking sale, closing the gap to its rising level of support of the Fibonacci retracement fan 38.2. A key level to monitor is the intraday minimum of 6,07910, the minimum of the previously reversed breakdown. It is feasible that a boost below this level will inspire the next wave of net sales orders in USD / TRY. It will clear this pair of coins to descend to its short-term resistance zone located between 5,95319 and 5,98526, as marked by the gray rectangle. You can read more about the Fibonacci recoil fan here.
In the case of a breakout in the Strength Index above its falling resistance level, the USD / TRY is expected to exceed its resistance zone. With the US economy on the verge of a potential recession, the upside potential is limited to its next long-term resistance zone, located between 6,33730 and 6,41854. The upper level represents the lower part of the candlestick that marked a historical maximum in this pair of coins. Top Forex broker
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