USDTRY extends pullback from new record high on expectations of CB’s action to stop lira’s fall

The Turkish lira strengthened further on Thursday, extending bounce from new record low at 4.3741 (posted on Wednesday) to session high at 4.2265, retracing over 38.2% of USDTRY’s 4.0294/4.3741 upleg.
Lira regained traction after Turkish President Erdogan held unscheduled meeting with his economic team, in order to tackle the problem with strong depreciation of Turkish lira which fell around 13% from the beginning of the year.
President Erdogan supports the idea of low interest rates in order to support the economy, but double-digit inflation requires stronger action from the central bank, which did not follow accordingly.
President Erdogan and his economic team, including heads of the central bank and the biggest Turkey’s banks, agreed to take a measures to ease interest rate pressure and stop lira’s steep fall.
Encouraging news gave positive initial results, however, markets will be closely watching further steps of the CBRT.
Policy tightening ahead of scheduled central bank’s policy meeting or intervention are on the table, but according to current situation, are unlikely to happen, however, the central bank is expected to take an action.
Traders will be looking for fresh bullish signal for lira on pair’s close below 4.2424 Fibo support, which would signal deeper correction of USDTRY’s 4.0294/4.3741 upleg.
The notion is supported by daily RSI and slow stochastic reversal from overbought territory and south heading 14-d momentum.

Res: 4.2927; 4.3080; 4.3382; 4.3500
Sup: 4.2424; 4.2265; 4.2000; 4.1932