EUR-USD Slips as Turkish Lira Weakens Further

• Further EURUSD weakness is expected with prior support now turning to strong resistance.
• USDTRY slips back after trading above 7.20 as Turkey readies plans to restore confidence.

EUR-USD RATTLED AT FRESH ONE-YEAR LOW

EUR-USD continues its journey lower as the Turkish Lira weakens further. Late last week reports showing EU bank exposure to Turkey rattled the single-currency and today’s fall – USDTRY hit a fresh all time low around 7.20 – compounded the problem.

The Lira did rebound back below 7.00 after the Turkish Finance Minister Berat Albayrak said that the government had a plan to restore calm and that ‘institutions will take the necessary actions as of Monday morning’.

This warning gave USDTRY a short-term bounce, but markets remain likely to sell the Lira into any strength, unless the Finance Minister’s announcement deters the bears. Last week a report in the Financial Times highlighted European bank’s exposure to the Turkish Lira, prompting a sell-off in the financial space.

EURO STOXX BANK INDEX (MAY 2016 – AUGUST 2018)

EURUSD currently trades below 1.1400 and may fall back to levels last seen over a year ago. Previous support levels at 1.1448 and 1.1554 now turn into resistance, while the next level of support – the 61.8% Fibonacci retracement of the January 2017/February 2018 rally – does not come into play until 1.1187.

The pair trade below all three moving averages but have dipped into RSI oversold territory and may find a short-term reprieve before moving lower.

EURUSD DAILY PRICE CHART (OCTOBER 2017 – AUGUST 13, 2018)

Source: DAILYFX