USD/TRY: levels to watch with looming Referendum.

The Turkish Constitutional Referendum will take place in just over a week, on Sunday April 16th, with the result likely to trigger large movement on the USD/TRY depending on the outcome. In this post I consider both bullish and bearish technical levels I will be watching on the USD/TRY in the lead up to, and following, this Referendum.

The Turkish Lira weakened significantly throughout 2016 but has stabilized somewhat over the last few months following intervention by the Turkish Central Bank to help support the local currency. USD/TRY traders would be well advised to read up on the background context for this Referendum and the article found through this link is one that I found of some use. 

Another article I read suggests that a Yes result, whilst not socially palatable to some, might provide opportunity for some political certainty and stability and help to further support the Lira, thereby weakening the USD/TRY. This same article posits that a No vote might lead to ‘negative market reaction and political uncertainty’ with the inference being this could weaken the Lira, thereby supporting the USD/TRY. I’m not sure whether this particular assessment about the Lira’s reaction is widely accepted but I will be watching key technical levels for either a bullish or bearish reaction to this Referendum.

USD/TRY weekly: price action has been consolidating within a Flag since the start of this year. Thus, if not broken beforehand, I’ll be watching both upper and lower trend lines for any momentum-based breakout:

USD/TRY weekly + Fibs:

  • Bearish targets: Placing Fibonacci retracement on the last swing high move on the weekly chart shows the popular 61.8% fib just above the previous S/R level of 3.10. These would be the two longer-term targets I would watch with any bearish Flag breakout move.
  • Bullish target:The psychological whole number 4.0 level would be the target I’d watch with any bullish Flag breakout:

USD/TRY weekly Cloud: price is well above the weekly Ichimoku Cloud so some mean reversion here would not surprise:

USD/TRY daily: This chart, if it could talk, I’m sure would say…..’wait for any trend line breakout before trying to pick the next directional move here’.

USD/TRY daily Cloud: The daily Ichimoku Cloud has flipped to bearish and price is currently IN the Cloud. Thus, wait for any make or break from from this congestion zone too:

USD/TRY 4hr: It is about a 420 pip move to this upper Flag trend line so I’d expect that might be tested in the lead up to the Referendum. I wouldn’t be surprised if price action chopped around a bit until then though:

Summary: I’m watching the weekly/daily chart Flag trend lines for any breakout as to clues about the next directional move with the USD/TRY in response to the Turkish Referendum. Depending on any Flag breakout I’ll then be watching:

  • Bearish targets: The weekly chart’s 61.8% fib, just above the previous S/R level of 3.10, and the 3.10 level with any bearish Flag breakout. 
  • Bullish target: The psychological whole number 4.0 level with any bullish Flag breakout:

2 thoughts on “USD/TRY: levels to watch with looming Referendum.

  1. The fundemental analysis by a financial analist do not take into account the political consequenses of yes vote sufficiently in Turkey. The constitutional ammendment to be voted is a great shift from democratic regime. This may result in the immediate suspension of EU membership talks and Turkey’s membership in the European human rights system. I this happens, I am not sure if the Turkis Lira gains value even in the short term period.

    This will be also a shock for millions of secularists and I do not know if there will be their ensuing actions that may deteriorate the political stability.

    • I agree Mahmut,

      I would not have thought a ‘Yes’ result would have been taken so lightly.


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