The Turkish Lira has recently reached a historic low against the US Dollar, surpassing the 30 mark following a prolonged upward trend. This decline underscores the challenges faced by the Turkish currency, having lost more than a third of its value in the past year.
Despite this struggle, analysts are now adopting a more positive outlook due to the potential for a significant shift in economic policy. There’s speculation that the current low-interest-rate policy might be abandoned in favour of a more assertive tightening policy. Meanwhile, on the other side of the spectrum, the US has disclosed its latest inflation figures, with year-over-year inflation exceeding the 3.2% expectations at 3.4%. Additionally, the core inflation figure has slightly contracted from 4% to 3.9% but came in above market predictions of 3.8% to round off a hawkish report.
Technical
The currency pair has exhibited a strong uptrend over the recent months on the 4H chart, but the slope of the uptrend has diminished slightly, resulting in a rising wedge pattern atop the uptrend. However, with the latest US CPI report, a fundamental shift could propel the pair even higher.
Resistance is established at 30.0371. If this level gets breached, the rising wedge could fall away, allowing the currency pair to continue forming new all-time highs on its current bullish trend.
However, if this resistance holds, a pullback could occur toward 29.9407. This support level could be the last line of defence to a potential channel breakdown. If a breakdown occurs, lower support at 29.8508 and 29.8118, the 50-SMA, could come into play.
Summary
The USDTRY currency pair has recently teased new all-time highs, and with the latest US inflation report, the uptrend could continue if the resistance at 30.0371 gets breached in the upcoming sessions.
Sources: Koyfin, Tradingview
Piece written by Tiaan van Aswegen, Trive Financial Market Analyst
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