EUR/TRY Skyrockets to Fresh Record Highs | Technical Analysis

EUR/TRY skyrocketed today after Turkish President Recep Tayyip Erdogan defended the massive and continuous interest rate cuts amid double-digit inflation. He said that this is part of an “economic war of independence”, rejecting calls from investors and analysts to adopt a different strategy.

Inflation is now near 20% in Turkey, and against any orthodox monetary policy practices, the Turkish central bank has cut interest rates by 400bps since September, with the latest one being a 100bps, delivered last week. This, combined with investors fear over the lack of independence of the Turkey’s central bank, has resulted in a 40% drop in the lira this year, and 20% since the start of last week alone.

From a technical perspective, EUR/TRY is trading above an upside support line since November 15th, and today’s rally took it above yesterday’s high of 12.92, with the rate now trading slightly above 14.00. Obviously, the picture looks as positive as it can get and thus, we would expect the rate to continue conquering fresh highs. With no prior highs or inside swing lows to mark any potential resistance zones, we will mark as such the psychological territories of 14.50 and 15.00.

Now, in order to abandon the bullish case and start examining a bearish reversal, we would like to see the rate dropping all the way back below 12.25, near Friday’s low. The rate would already be below the aforementioned upside line and may the first confirmation of a lower low in a long time. The bears may then get encouraged to dive towards Thursday’s low, at 11.83, the break of which may allow extensions towards the inside swing high of November 15th, at 11.53, or even the low of November 12th, at 11.27.


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