FxWirePro: Both technicals and fundamentals propel USD/TRY H1 2016 forecasts to 3.25

The main drivers will likely be disregard of the inflation targeting regime and high levels of foreign liabilities.

Headline inflation remains remarkably high despite the collapse in oil prices, because real interest rates remain low. Headline inflation is back above 8% with no signs of convergence towards the 5% target.

We believe that a combination of a Fed hike and short-term international claims at over three times FX reserves may push local corporates to buy USD/TRY.

Technicals:

On long term perspectives, it has recently made 23.6% Fibonacci retracements and exactly from that juncture began spiking off.

These decisive bounces are conformity to the huge volumes (see grey shaded areas) that means healthy bull run remains intact.

On a broader perspectives, more bullish potential in the months to come as the pair currently attempting breach resistance 2.99 levels.

Any minor abrupt price drops would not be surprised and misinterpreted as downtrend.

RSI shows divergence to recent upswings but certainly not an accurate selling call.

Stochastic boils down some small price correction in short term.

Despite this bearish pattern bulls ignore to continue their business, hence, this reignites us going along with the fundamental assumptions of technical analysis (don't study technical indicators or pattern in isolation).

Current prices are way beyond 10 DMA that signifies uptrend in medium term remains intact.

We believe USD/TRY will trade above 3.25 in the coming months.

For now, 2.91 held the strongest support and this level is what we could in maximum downside drag, but we could still foresee USDTRY at around 3.20 by mid-2016.