Turkey’s economy is forecast to expand by 3.0% in 2020. The Turkish government predicts economic growth of 5.0% in each of the next three years, on the back of its new economic program. Interest rates are expected to decrease further, and a strong tourism season slated for a reduction in the account deficit as imports are set for contraction. Turkey is in the process of relying more on its domestic economy, and less in foreign direct investment, which is likely to boost the Turkish Lira moving forward. The EUR/TRY is expected to start 2020 with a breakdown below its resistance zone.
The Force Index, a next-generation technical indicator, recorded a lower high as this currency pair pushed higher, which resulted in the formation of a negative divergence. Bearish momentum is expanding, and the Force Index moved below its horizontal support level, converting it into resistance. The descending resistance level is favored to pressure this technical indicator into negative territory, putting bears in charge of the EUR/TRY, and attempting a breakdown below its ascending support level. You can learn more about the Force Index here.
Price action exhausted its upside momentum inside of its resistance zone located between 6.61676 and 6.66887, as marked by the red rectangle. A breakdown is favored to ignite a profit-taking sell-off, and forex traders are advised to monitor the intra-day low of 6.56150. This represents the low before the EUR/TRY pushed into its resistance zone, and a breakdown is expected to result in the addition of new net short orders. It is also anticipated to close the gap between price action and its ascending 38.2 Fibonacci Retracement Fan Support Level.
This currency pair will face its first meaningful support level once it reaches its short-term support zone located between 6.43790 and 6.48446, as marked by the grey rectangle. The 50.0 Fibonacci Retracement Fan Support Level is crossing through this zone, with the 61.8 Fibonacci Retracement Fan Support Level approaching the bottom range of it. With the Eurozone economy anticipated to struggle throughout 2020, a breakdown cannot be ruled out. The next long-term support zone awaits the EUR/TRY between 6.28008 and 6.32686. You can learn more about a breakdown here.
EUR/TRY Technical Trading Set-Up - Breakdown Scenario
Short Entry @ 6.66400
Take Profit @ 6.43800
Stop Loss @ 6.72000
Downside Potential: 2,260 pips
Upside Risk: 560 pips
Risk/Reward Ratio: 4.04
A double breakout in the Force, taking it above its descending resistance level, would be required for the EUR/TRY to sustain a breakout above its resistance zone. Given the long-term fundamental outlook for this currency pair, supported by short-term technical developments, a breakdown sequence remains dominant. The next resistance zone is located between 6.80102 and 6.86853, which should be considered and excellent short-selling opportunity.
EUR/TRY Technical Trading Set-Up - Limited Breakout Scenario
Long Entry @ 6.76000
Take Profit @ 6.85250
Stop Loss @ 6.72000
Upside Potential: 925 pips
Downside Risk: 400 pips
Risk/Reward Ratio: 2.31
