A non-trading friend of mine recently mentioned his conundrum in converting a substantial amount of Turkish Lira into Sterling. I immediately offered to give it the Dynamic Trader once-over. There’s nothing like a real world question to pique my interest!
A quick look at the chart shows this is not tradeable (from a longer-term trend trading stance). But what else do we see?
Looking at GBPTRY – and wanting to convert Lira to Sterling – we want to see if price is likely to go lower.
On the weekly timeframe price is still trading above the 200sma. This may act as support and prevent price falling further – at least in the near-term.
2015 was a turbulent year – it created a relatively large range from 3.4414 to 4.7447.
Price has fallen from that peak (to about the 3.9300 mark) and is currently in the upper zone of a previous consolidation (January 2014 – April 2015).
On the daily timeframe price is trading below the 200sma. This should act as resistance (as it did in May and June earlier this year) helping to prevent price rising further. Price is trading just below 3.9542 (the high of 2014) which could also act as resistance. However, it is currently in a range between about 3.7500 and 4.1000.
The top of the range offers good resistance (meaning price could struggle to go higher) as it’s pivot high is currently in close proximity to the daily 200sma, previous support/resistance and the 4.000 figure – offering a cluster of resistance.
However, the low of the range offers fairly strong support, too, (meaning price could struggle to go lower) due to the weekly 200sma and, less so, several minor pivot highs from 2014 (not annotated on the charts).
Overall, I would say the trend is looking to be gathering more strength to the downside than upside – but not convincingly so right now.
So what advice, from a technical perspective, should I give my friend?
If he’s in a hurry to convert his cash he could take it now at around 3.9200. Price is in a range with strong support and there is no immediate reason to suspect that support will be broken, to the downside, anytime soon (i.e. the next few weeks or possibly months).
If price breaks below the support of July 2016 (3.7333) and the weekly 200sma, it could fall to about 3.4000 before finding support from the low of the 2014/15 consolidation zone.
If he’s not in a hurry, and prepared to accept the associated risk of price potentially going higher, he would wait and see if price breaks below the 3.4000 zone. If so there is space for it to fall as far as the 2006 high of 3.1376 (just prior to the 3.0000 figure) before encountering further support.