Jump to content

USD/TRY back above 17.00 as Erdogan pledges to keep cutting rates

Recommended Posts

USD/TRY is up over 4% so far this week, adding up to almost 15% gains in the last month.


Daniela Sabin Hathorn | Presenter and Analyst, London | Publication date: Wednesday 08 June 2022 

Turkish lira continues to weaken against the US dollar

USD/TRY is up over 4% so far this week, adding up to almost 15% gains in the last month.

Turkish President, Recep Tayyip Erdogan’s reluctance to acknowledge the need to control soaring inflation, which reached 73% last month, is causing the value of the lira to deteriorate.

Speaking after a cabinet meeting on Tuesday he dismissed the need to raise interest rates and vowed to continue cutting them in an effort to ease the pressure on consumers, as he believes inflation is just one of several problems that should begin to ease next year. He believes that the use of high borrowing costs to supress consumption is misguided.

His obsession with ultra-low rates, which he forces upon the central bank’s guidance, only adds more pressure to rising prices, creating a vicious cycle which is causing the central bank’s FX reserves to plunge.

The rise in food and energy prices is the main issue the Turkish economy is facing, which has been exasperated by the war in Ukraine.

Turkey imports over 90% of the energy it consumes, and the continued drop in the lira is only making imports more expensive, meaning the central bank must compensate domestic consumers in order to avoid appetite for foreign currencies.

The outlook for the Turkish lira remains very weak as long as Erdogan continues to play out his own inflation mandate. Especially at a time when most other central banks around the world are ramping up their monetary tightening in an attempt to make up for lost time that let consumer prices reach over 40-year highs in many countries.

The drop in FX reserves means the lira is facing a currency crisis, and the outlook for USD/TRY seems to be a one-way street towards the highs seen in December last year when Erdogan announced that a series of rate cuts would take place.

USD/TRY chart

The weekly chart is showing a clear bullish pattern of higher lows, forming an ascending trendline that is acting as support.

The weekly highs have also been breaking higher but the distance in the new peaks is shortening, meaning there is some resistance along the way.

There is a lack of clear resistance areas heading up to the December 2021 high given the magnitude of the move back then, but buyers should watch out for the area around 17.1829 as that was the weekly high on the week of the 13th of December 2021 before the move towards the high of 18.4372.

Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • General Statistics

    • Total Topics
    • Total Posts
    • Total Members
    • Most Online
      10/06/21 10:53

    Newest Member
    Joined 04/06/23 19:52
  • Posts

    • The inclusion of trading volume as a standard indicator in charting software for the past three decades is not without reason—it offers a vital advantage. Volume analysis grants traders valuable insights into the actions of market participants at different price levels. By focusing on volume, traders can react more effectively to price movements rather than attempting to predict the future direction of prices, as is often the case with many other technical indicators. 📍Key points about volume Here are the key points regarding the volume indicator commonly plotted on the X-axis in trading: 🔹Volume Indicator: The volume indicator calculates the total number of shares or contracts traded during a specified time period. It is usually displayed as a histogram or line chart, with time represented on the X-axis. 🔹Liquidity: Volume is a critical metric as it provides insights into the liquidity of a security. Higher volume generally indicates greater market participation and liquidity, making it easier to buy or sell the asset without significantly impacting its price. 🔹Confirmation: Volume can validate the authenticity of price movements. In an uptrend, increasing volume supports the bullish move, indicating strength and conviction among buyers. Conversely, declining volume during an uptrend may signal weakness or lack of interest. The same principles apply to downtrends. 🔹Breakouts and Reversals: Volume analysis is often employed to identify breakouts and potential trend reversals. A significant increase in volume during a breakout suggests a higher probability of a sustained move, while decreasing volume near a support or resistance level might indicate a potential reversal. 🔹Divergence: Volume can unveil discrepancies between price and market sentiment. For instance, if prices are rising while volume is decreasing, it could suggest that the rally is losing momentum and a reversal may be imminent. Similarly, increasing volume during a price decline might indicate selling pressure and the potential for further downside. 🔹Confirmation of Patterns: Volume can serve to confirm or invalidate chart patterns such as triangles, head and shoulders, or double tops/bottoms. Higher volume during pattern formations enhances their reliability, while low volume can cast doubt on the significance of the pattern. 🔹Watch for High Volume: Unusual spikes in volume can indicate significant market events, such as earnings releases, news announcements, or institutional buying/selling. Abnormal volume levels can lead to increased volatility and potentially present trading opportunities. 🔹Relative Volume: Comparing current volume to historical average volume helps assess the significance of current trading activity. Higher volume relative to the average may imply increased interest, while lower volume might suggest a lack of conviction or reduced market participation.
    • I don't know but it looks like a really awesome service Because I have come across all sorts of mixers in my work  
    • Charting the Markets: 2 June Indices rally as US agrees debt ceiling bill. EUR/USD, GBP/USD rally while EUR/GBP stabilises as US debt ceiling bill is passed. And WTI recoups recent losses while gold, silver on track for first weekly advance. Axel Rudolph FSTA | Senior Financial Analyst, London | Publication date: Friday 02 June 2023               This is here for you to catch up but if you have any ideas on markets or events you want us to relay to the TV team we’re more than happy to.
  • Create New...