USDTRY continued edging higher during the European morning Friday

USD/TRY

The dollar traded unchanged or higher against most of its G10 counterparts during the European morning Friday. It was higher against GBP, NZD, CAD, NOK and AUD, in that order, while it was lower against SEK. The greenback was virtually unchanged against EUR, CHF and JPY.

The UK manufacturing PMI declined to 55.4 in July from 57.2 last month, lower than the market consensus of 57.2. The figure hit its lowest level in a year, adding to the recent weak data on the housing market and pushing cable down approximately 0.20%. The slowdown in the economy was partly anticipated by the BoE however and will most likely be a key concern at the Bank’s meeting next week.

SEK was the only winner against the dollar during the European morning. The nation’s manufacturing PMI rose to 55.2 in July from 54.8, above forecasts of a fractional increase to 54.9. The better-than-expected figure helped SEK to recover some of its losses from last Wednesday’s poor Q2 GDP reading and gave investors a reason to hope for a stronger currency and robust economy.

The Turkish lira was one of the main losers among the EM currencies, extending further its losses amid a rise in uncertainty about developing countries. Argentina’s second default in twelve years reminded investors over the high risk they take investing in EM countries, especially amidst the global economic instability that prevails. With this in mind, investors continued pushing EM currencies off the cliff for the second day in a row. Besides that, Turkey’s weak manufacturing PMI released earlier today exacerbated the deterioration of the lira.

USD/TRY continued edging higher during the European morning Friday, overcoming yesterday’s highs of 2.1465. I believe that the longs will now go for the 2.1530 (R1) resistance barrier, where an upside violation may set the stage for further bullish extensions and target the next obstacle at 2.1600 (R2). The price structure is higher peaks and higher troughs above both the moving averages and above the blue short-term uptrend line. This keeps the bias to the upside. Additionally, both our momentum indicators eliminated prior negative divergence, moving above their downside resistance line. This supports my view that the bulls have shifted the gear up and they are willing to continue driving the battle higher.

• Support: 2.1465 (S1), 2.1390 (S2), 2.1310 (S3)

• Resistance: 2.1530 (R1), 2.1600 (R2), 2.1700 (R3)