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The US dollar is still gaining ground against the Turkish Lira currency after a hugely volatile four-week period, whereby the USDTRY pair moved in an extremely large trading band into the recent election.
As the pair remains trapped at record highs as financial institutions show a lack of confidence in the aftermath of the re-elected Turkish government. The outcome of the leadership vote clearly shows the market is negative on the ruling party.
In fact, the loss of value in the Turkish Lira is nearly 20 percent in the past year. The combination of faulty fiscal policy in Turkey and the rhetoric from the US Federal Reserve is not making for a solid outcome for the Turkish Lira.
In truth, there is no specifics on how they will be funding such an initiative and to be honest, and simply put, it does not really solve the root problems of the currency and the Turkish economy.
We should also consider that if a currency collapse happens it could be devasting for other emerging market countries, and it could have huge ramifications for global banks with exposure to Turkey.
The USDTRY certainly looks like it will continue to trend higher, but the short-term may see reversals lower during the coming trading sessions, although a break of the 21.00 looks likely to eventually happen.
Current sentiment metric towards USDTRY shows that hints that this current price action is probably bearish, but a stepper correction may happen as the sentiment bias is very severe.
The ActivTrader market sentiment tool shows that just 90 percent of traders are bullish towards USDTRY. Going forward, we really need to see a much strong bull bias by retail to help the chances of a sustained retrace.
USDTRY Technical Analysis
Lower time frame analysis shows two possible outcomes for the USDJPY pair right now. The first scenario, which is bearish, shows that a rejection from the top of the range, close to the $21.00 level back towards the $20.40 level.
The bullish scenario for the USDTRY pair would see a breakout above the $21.00 level and a test towards the $22.00 and then the $23.00 resistance level.
Higher time frame analysis is far more bullish, with the price trading above the Ichimoku cloud and the Lagging Line issuing a strong buy signal.
Bulls need to breach the December trading high, in order to form a huge bullish the price pattern, which could ignite a huge rally towards the 30.00 level.
