The Central Bank of the Republic of Turkey (CBRT) has raised its 1-week repo rate to 19.00%. The 200 basis points rate hike by the CBRT thus surpassed the expectation of analysts, who had forecast a rate hike of 100 basis points to 18%. As a result of the hawkish move by the CBRT, the Turkish Lira gained strongly against the US Dollar, with the USD/TRY diving 1.74% as of the time of writing to trade at 7.36090.
The CBRT rate statement, as quoted by Reuters, mentioned that the exchange rate and commodity prices were impacting the inflation outlook negatively, while also noting that “economic activity is on a strong course.” The CBRT said it decided to “deliver front-loaded and strong tightening considering the upside risk to inflation.”
The downside move on the USD/TRY comes on the back of a weakening of the greenback by the FOMC decision to delay the rate lift-offs in the US until 2023 in a move that was more dovish than the market’s expectations.
Technical Levels to Watch
The USD/TRY has violated the 7.39840 support level but needs a 3% penetration close below that price mark to confirm the breakdown. This scenario would open the door towards the 7.26356 support level. 7.19656 is an additional mark, being the site of lows seen on 11/21 August 2020.
On the other hand, a rebound by the greenback retests the 7.51705 resistance, with 7.69700 and 7.78688 serving as additional targets to the north.
USD/TRY Daily Chart