is a catalyst for the decline of the lira

The current dynamics

The USD/TRY pair is trading in a long-term uptrend: this week, it continued to examine the 34.3750 level (Murray [8/8]), but it still cannot break above it, while the lira is under pressure after the Central Bank of the Republic of Turkey changed its price forecasts.

We would like to remind you that the deflationary processes in the national economy continue, but not as fast as expected. In particular, in October the consumer price index will fall from 2.97% to 2.88%, which does not justify the forecast of 2.60%, and in annual terms - from 49.38% to 48.58%, instead of the expected 48.20%. In this context, last Friday the regulator revised its previous inflation estimates upwards: now officials assume that by the end of the year the figure will be 44.0%, instead of 38.0%, as previously expected, and next year - 21.0%, instead of 14.0%. The head of the department, Fatih Karahan, stated that the current situation does not favor the correction of monetary policy, but most experts expect the regulator to start reducing the cost of loans next year.

In turn, the US currency continues to receive support following the victory of Republican Party representative Donald Trump in the US presidential election. Investors fear that the introduction of new trade tariffs and significant tax cuts, while conducive to economic growth, will at the same time lead to an increase in domestic prices, which will lead to more cautious monetary easing by the US Federal Reserve or even a further increase in borrowing costs. We note that inflation data for October confirmed its stabilization above the target level: in annual terms, the consumer price index rose from 2.4% to 2.6%, while the core index stood at 3.3%. These statistics have increased the likelihood that the regulator will refuse to adjust the reference rate in December.

Therefore, current fundamental trends favor continued growth in USD/TRY pair prices in the medium term.

Support and resistance levels

The USD/TRY pair is near the level of 34.3750 (Murray [8/8]), the breakout of which will ensure the continuation of growth to the level of 34.5703 (Murray [ 2/8], Fibonacci extension 100.0%). For the "bears", the level of 34.1796 (Murray [6/8], below the middle line of the "Bollinger Bands" indicator, seems to be the main one. A consolidation below it will lead to the development of a further decline to the levels of 33.9843 (Murray [4/8]) and 33.7890 (Murray [˗2/8]).

Technical indicators show that the market continues to trend upwards: the Bollinger Bands and Stochastic lines are reversing downwards, and the MACD remains stable in the positive zone.

Resistance levels are: 34.3750, 34.5703.

Support levels are: 34.1796, 33.9843, 33.7890.

Trading scenarios

Long positions can be opened from the level of 34.3750 with the target at 34.5703 and Stop Loss at 34.2500. The term of execution is: 5–7 days.

Short positions can be opened below 34.1796 level with targets at 33.9843, 33.7890 and Stop Loss at 34.3200.