FxWirePro: USD/TRY all-time high takes off to new stages, never buck major trend but expect interim dips for fresh longs

The Turkish lira weakened sharply in the recent times, with USDTRY surpassing 3.05 range and then to hit fresh highs of 3.4083 levels.

Bulls manage to break out above long lasting range and stiff resistance of 3.07 with bullish SMA crossover. Current prices are consistently spiking higher above SMAs on weekly terms.

For today, the bulls are spiking higher despite back to back shooting stars at 3.3586 and 3.3592 levels, so, wise to capture dips for fresh longs.

Massive volumes formation on rising prices has also been in conformity to the robust uptrend.

Most importantly, RSI on both daily and weekly time frames is going out of the frame that signals the strength in rallies. So, it is advisable not to go against the extremely bullish trend that's getting out of the frame.

While %k crossover on stochastic even above the 80s which is overbought zone indicates the intensified bullish momentum.

MACD’s bullish crossover clearly signals ongoing upswings to extend further.

Most importantly, bulls continued traveling last month’s breach of long lasting range bounced trend of this pair, bouncing above upper range after testing support at 7EMA on monthly terms.

Following on from the above explanation on EM FX, we note here that CBT is likely to be pushed into a corner by the widening interest rate differential.

It is one of the only remaining central banks around EM which is viewed by market participants as unable to hike rates because of political pressure.

Meanwhile, at USDTRY of 3.25, imported inflation pass-through will escalate to faster than 10% by next month (via a combination of year-on-year acceleration in commodity prices and change in the lira). We no longer expect any rate cuts from CBT this year, instead, actual rate hikes may be possible.

Unless markets calm down soon, USDTRY could continue to spike, and this will trigger another negative spiral between exchange rate and inflation.