The USDTRY hit new record high at 4.5643 in early trading on Monday, extending steep upleg from 3.7153 (2018 low), as the pair advanced nearly 19% since the beginning of the year.
nother easy break through psychological barrier (4.50 in this case) signals that there are very little obstacles for lira to weaken further, as Turkey is sliding into crisis. Analysts agree that such scenario would be fully home-made as Turkey’s central bank has all tools to stabilize the situation.
The problem appears in divergence between President Erdogan’s view about the interest rate, as he supports lower interest rates and CBRT, who needs to increase rates in respond to two-digit inflation and slow down lira’s steep fall.
If the central bank does not hike rates, following recent meeting of President Erdogan with his economy team, scenario for lira would remain disastrous.
The pair is currently riding on the third wave of five-wave cycle from 4.0051 (19 Apr low) which eyes its 100% Fibonacci expansion (4.5951) to verify wave principles.
Break higher could extend rally towards FE 138.2% at 4.7833.
Broken psychological 4.50 barrier now acts as support which should contain dips.
Res: 4.5643, 4.5951, 4.6000, 4.6228
Sup: 4.5328, 4.5000, 4.4929, 4.4675