EUR/TRY bounces off all-time high and forms a double top pattern

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Today the Lira reached 3.47590 to the Euro, the pair’s all time high, which was last reached in September 2015. We could see that diverging Fundamentals played a part in bringing about this push up. In the UK, the courts ruled that Parliament must approve Brexit before it could be implemented, which brought optimism to the GBP and Euro for that the exit might be a soft one. Conversely, in the Middle East, Turkey and Iraq are at loggerheads over Turkey’s deployment of troops in Mosul, and Turkey has built up forces along the Iraq-Syria border.

Shortly after achieving the high, the pair retracted and now hovers at around 3.44780. This kind of bounce is to be expected as a pair tests its all-time high — A more significant psychological point than an all-time high or low doesn’t exist in Forex trading. However it still remains to be seen how much the price will retrace, and whether it will go so far as to hit my predicted 40% retrace level before turning around to test the high again. Given the long-term up-trend and deteriorating Fundamentals in Turkey, such a re-test is all but certain.

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Whatever the result, it goes without saying that this is a historical moment in Turkish modern history as well as in the relationship between the Euro-zone and Turkey. Its significance is depleted only by the fact that the pair has continuously been making new highs for several years. How far will EUR/TRY’s monstrous uptrend continue in the future? It’s an interesting question. The strength of the uptrend is unquestionable, but the last two years been noticeably more “rangey” than any other point since 2007 (as far as my chart goes back, see below).Indeed, it has really only just gotten past the resistance level at 3.27862 (red line), which had plagued its progress for eight months (see the multiple wicks since Nov. 2015). Moreover, EURTRY has been surprisingly resilient, despite the Fundamental events that have been thrown at it in Turkey (the coup attempt, bad credit ratings, conflict in Syria and Iraq), so there’s a possibility that we could be nearing a turning point in the pair. This very much depends on the the state of the Euro-zone, how far Turkey will fall into conflict and authoritarianism, not to mention Turkish interest rates, etc.

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