The Turkish lira remains in defensive mode for the second day as dollar bounced on lowered expectations for Fed’s 0.5% rate cut.

The pair dipped to 5.5977 on Friday, to cover the gap from 8 July when lira fell sharply after the CBRT governor was fired and approached key supports at 5.5828 (4 July low), 5.5740 (Fibo 61.8% of 5.1595/6.2445) and 5.5672 (200DMA).

Lira needs clear break here to signal fresh strength and extension of rally from its 2019 low at 6.2445.

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Initial resistance lays at 5.6907 (20DMA) but stronger bullish signal can be expected on extension above 100DMA (5.7629).

The Central Bank of Turkey meets on Thursday, with market expectations for 1% – 5% rate cut (2.5% cut is seen as likely scenario) as traders expect rates to fall to 15%-20% levels by the end of the year (from current 24%) to come more in line with inflation (currently at 15.7%).

Res: 5.6907, 5.7337, 5.7629, 5.7845
Sup: 5.6411, 5.5977, 5.5828, 5.5740


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