EUR/TRY: Resistance Zone is Depleting Bullish Momentum

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Tensions between NATO members France and Turkey have intensified with leaders from both countries lashing out in public. At the same time, the Eurozone manufacturing sector remains in a recession except for France. While France is home to the only Eurozone manufacturing sector in expansion, Turkey’s third-quarter GDP clocked in at 0.9% annualized and placed the country back on its growth track. The EUR/TRY ascended despite the positive news surrounding the Turkish economy and has now moved into its short-term resistance zone.

The Force Index, a next-generation technical indicator, started to contract before price action reached its resistance zone and a negative divergence formed as a result. This bearish trading signal suggests a breakdown is pending as bearish momentum is on the rise. The descending resistance level is pushing the Force Index to the downside, as marked by the green rectangle, and a breakdown below its horizontal support level is favored. This technical indicator is then on track to move into negative territory and place bears in charge of the EUR/TRY with a push below its ascending support level anticipated to follow. You can learn more about the Force Index here.

Forex traders are advised to monitor the Force Index as a breakdown below its horizontal support level is additionally expected to lead to a profit-taking sell-off in the EUR/TRY following a breakdown below its short-term resistance zone. This zone is located between 6.36310 and 6.38006 as marked by the red rectangle and a breakdown will push this currency pair below its descending 61.8 Fibonacci Retracement Fan Resistance Level. The Fibonacci Retracement Fan is then expected to guide price action to the downside.

Following a breakdown in this currency pair, the downside potential can extend into its next support zone which is located between 6.28008 and 6.29993 as marked by the grey rectangle. A breakdown in the Force Index below its ascending support level may result in a breakdown attempt below support, but a fundamental catalyst would be required. The next support zone awaits the EUR/TRY between 6.14473 and 6.17904. You can learn more about a breakdown here.

EUR/TRY Technical Trading Set-Up - Breakdown Scenario

  • Short Entry @ 6.36750

  • Take Profit @ 6.28250

  • Stop Loss @ 6.39000

  • Downside Potential: 850 pips

  • Upside Risk: 225 pips

  • Risk/Reward Ratio: 3.78

A breakout in the Force Index above its descending resistance level may inspire a breakout attempt in the EUR/TRY. Given the long-term fundamental outlook, the upside potential remains limited to its next long-term resistance zone located between 6.41168 and 6.42860 which marks an excellent short selling opportunity in this currency pair. The technical picture favors a contraction and this remains the dominant trading scenario.

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EUR/TRY Technical Trading Set-Up - Limited Breakout Scenario

  • Long Entry @ 6.40000

  • Take Profit @ 6.42500

  • Stop Loss @ 6.38750

  • Upside Potential: 250 pips

  • Downside Risk: 125 pips

  • Risk/Reward Ratio: 2.00

EURTRY

Ibeth contributes daily market commentary in both English and Spanish (both of which she speaks fluently) and she also manages the DailyForex mobile app to ensure that traders around the world are getting important market updates in real time.