USD/TRY at critical juncture after recent decline

The Turkish lira enjoyed a welcome bounce within the final four months of 2018, with the radical appreciation in USD/TRY reversing to provide some pretty remarkable gains for the lira. Much of this has been associated with the breakdown and then resolution of relations with the US, where the decision to release the US citizen, Andrew Brunson, helped ease tensions between the two sides. Critically, the resurgence of the lira helped ease concerns over difficulties the Turkish government would face when trying to service their USD denominated debt.

However, we are now seeing some forms of strength for the USD/TRY pair, with the first trading day of 2019 providing the most volatile trading day since August 2018. The wider trend for USD/TRY remains bullish, and with the pair finally gaining ground over the past two months, it makes sense to look for a potential bottom in USD/TRY.

Lets start with the weekly chart, where two projected trendlines push into region currently being respected by USD/TRY price action. This perspective highlights both the wider uptrend, but also the bearish divergence and possibility of that this could be a short-term bearish flag formation in play. Whether we do see a bearish break or not should be relatively self-evident when taking a look at the shorter-term intraday charts.

The daily chart below highlights the higher highs and higher lows in play since the December low, with the recent decline bringing us close to that previous low of $5.2078. The existence of an inside trendline in this timeframe adds another element of supply to watch out for.

This far we have seen a tentative breakdown, yet we will want to see a break below that $5.2078 swing low to negate this recent resurgence. However, until that happens, there is a chance that we will see this pair begin to regain ground in a bid to continue the recent USD/TRY rebound.

Finally, the four-hour chart brings yet another trendline into play, with an inside trend of support playing out over the past two months. Interestingly, we have today seen the price rise through the $5.3557 high from Monday, providing the firm higher high in almost three weeks.

Certainly, this is a tentative sign at best, yet it is worthwhile noting the wider trend and potential for trendline support to come into play.