CBRT’s next steps should give clearer picture about lira’s direction after President Erdogan’s election victory

The USDTRY pair trades within choppy two-hundred pips range on Monday, following the victory of President Erdogan in Turkey’s election on Sunday.
Lira hit new two week high at 4.5352 after USDTRY started trading on Monday with gap-lower, but subsequently bounced to the session high at 4.7225.
Trader showed strong indecision as it is still unclear how the central bank of Turkey will act under new and bigger power that President Erdogan gained after election victory.
From one side, double-digit inflation which is more than twice of 5% target, pressures the central bank to further increase interest rates, while Erdogan favors growth over inflation and continuation of this policy would put Turkish lira under stronger pressure.
The CBRT made a surprise 300bps hike in May, but needs to continue to address inflation issue in order to encourage investors and ease pressure on lira.
Policy meeting on 24 July would give more clues.
Technical outlook is still bullish for the dollar, despite recovery rally from higher base at 4.4470 stalled at 4.77 zone, after repeated failures to close above pivotal Fibo barrier at 4.7440 (Fibo 61.8% of 4.9273/4.4470 pullback) and generate stronger bullish signal.
Rising 20SMA continues to underpin the action after Monday’s dip to 4.5352 proved to be short-lived, but close above 4.7440 pivot is needed to shift focus higher and unmask dollar’s new record high at 4.9273 and psychological 5.00 barrier.
Near-term structure would weaken on loss of 20SMA support, which could risk deeper dip and risk retest of key near-term supports at 4.4470 base.

Res: 4.6932; 4.7225; 4.7440; 4.7754
Sup: 4.6242; 4.5981; 4.5352; 4.4470