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Lira Remains Under Pressure

12/16/2022 1:58 PM

The EUR/TRY pair continues to grow within the long-term uptrend and this week has reached annual highs around 20.0270. The euro is strengthened by the market's reaction to the results of the last meeting of the European Central Bank (ECB) and the release of positive economic statistics in the EU. The day before, the regulator raised the key rate from 2.0% to 2.5%, slightly slowing down the pace of its increase (by 50 basis points) amid signs that inflation in the region has reached peak values. Officials said the interest rate hike would continue for a long time to ensure that the 2.0% price growth target was met. It was also announced that the ECB will reduce its balance sheet by 15.0B euros per month from March 2023.

Representatives of the regulator are confident that the Eurozone economy will face a recession, but they hope it will be short and shallow. Today's data was positive: EU Manufacturing PMI corrected from 47.1 points to 47.8 points, and Service PMI from 48.5 points to 49.1 points.

In turn, the Turkish lira remains under pressure due to the non-standard monetary policy of the Central Bank of Turkey. Unlike most world regulators, in the conditions of a significant price increase, the Turkish department does not raise but lowers the interest rate. Investors hope the decline cycle will end after the value was brought to 9.0% in November. Meanwhile, inflation in Turkey in the previous month, like in most world economies, slowed down the growth rate from 3.54% to 2.88% MoM and from 85.51% to 84.39% YoY, which prompted the country's president, Recep Tayyip Erdogan, to announce a likely decline to 40.0% over the next few months and to 20.0% next year. Experts also believe that the rise in prices will continue, and the lira will remain under pressure for a long time.

The price is close to 19.9218 (Murray [7/8]), the breakout of which will give the prospect of further growth to the levels of 20.3125 (Murray [8/8]) and 20.7031 (Murray [+1/8]). The key "bullish" level is 19.5312 (Murray [6/8]), supported by the middle line of the Bollinger bands. If the quotes fix above it, the decline may resume to the levels of 19.1406 (Murray [5/8]) and 18.7500 (Murray [4/8]), but this variant of movement seems less likely.

Technical indicators point to the continuation of the uptrend: Bollinger Bands and Stochastic reverse downwards, while the MACD is stable in the positive zone.

Resistance levels: 19.9218, 20.3125, 20.7031. | Support levels: 19.5312, 19.1406, 18.7500.

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