I was asked to take a look at the USDTRY Forex cross and it is a pair I look at from time to time. For those unaware, TRY is the Turkish Lira.
This is a weekly chart and what has resolved is a bull flag which is more obvious on the monthly chart. I’d still say there is some strength in the chart but on these higher time frames, the “rubber band” is being stretched quite far which means there is the potential for a snap back in price.
That certainly can set up a reversal trade as long as you have the context for it. You don’t want to short “just because” but would rather see a failure test of highs…much like we see at the left side of the chart with that reversal candlestick.
Just because we are heading for highs on the weekly you DO NOT just consider shorting unless price action signs are in place.
This daily chart shows how aggressive the upside move has been and at this point, the USDTRY looks to be heading towards some type of pullback/consolidation. This does not look like an exhaustion move to the upside (it can be difficult to decode whether we are looking at strength or exhaustion) and the impulse leg certainly deserves another run to the upside.
I’d be looking for a position long around 3.7 – 3.71 if the pullback continues. The last pullback ended up going sideways and if that happened here, I’d also look inside the consolidation for price action signs to the upside.
Above all…we do not forecast as traders. We react.
We react to areas where there is potential turning point and our analysis gives us context so we are not just firing off trades.
Also remember that charts are dynamic. While I would be looking to still position long during this pullback, that can change.
If price suddenly races to the top, I would NOT be looking for a long until that overbought condition wears off. I could look for a short if there is a rejection of highs.
If price suddenly drives down, I’d NOT be looking for longs on the next rally in price. I’d be more inclined to short the first rally off the momentum to the downside.