The Turkish lira was the top loser in Asian session as the pair opened with strong gap higher (nearly 15 figures) on Monday, on announcement that Turkish President Erdogan fired the Governor of Turkish Central Bank on Saturday that The President and CB Governor clashed over the interest rates as President Erdogan supports lower interest rates, while the central bank did not follow the instruction and further tightened rate policy, in attempts to fight double-digit inflation.
The lira remains very vulnerable, as the latest negative news add to existing fears over weakening economy and rising uncertainty over political crisis with the USA which may end in economic sanctions on Turkey.
The USDTRY bounced from key supports (provided by 200DMA and Fibo 61.8% support at 5.58/57 zone, which were under strong pressure, with signs for eventual break lower) that sidelined hopes of further lira’s strength for the time being.
Daily indicators turned north (momentum is rising and stochastic/RSI emerged from oversold territory) supporting reversal scenario. The upside is expected to remain in focus as long as today’s gap stays unfilled, with narrowing daily cloud, which is about to twist next week, also expected to attract bulls.
Close above daily Tenkan-sen (5.6983) is needed to generate initial bullish signal, with extension through cracked Kijun-Sen (5.7568) and daily cloud base (5.7736) needed to confirm and expose key barriers at 5.8300/60 zone (20/25 June lower platform/Fibo 38.2% of 6.2444/5.5828 descend).
Focus turns towards CBRT’s policy meeting on 25 July, with changes in the bank’s leadership, increasing expectations for possible start of easing monetary policy.
Res: 5.7568; 5.7736; 5.8300; 5.8365
Sup: 5.7071; 5.6983; 5.6575; 5.5889
