The Central Bank of the Republic of Turkey (CBRT) kept its repo rate unchanged at 8.25%, marking what looks like the end of its 1-year rate cutting cycle. The bank cited an increased prevalence of “demand-driven disinflationary effects in the second half of the year” as the main reason for leaving rates unchanged.
This ensures that the rate differential between the US Dollar and the Turkish Lira remains one of the widest in the world, which could potentially set up a carry trade potential.
The greenback remains under pressure as the Lira has gained significantly against it in the last six weeks. The pair has lost a modest 0.07% on the day as it continues to trade in a tight consolidation range, following the drop from the 7 May 2020 high of 7.26356, to the present levels of 6.84314.
Technical Outlook on the USDTRY
The Fibonacci tool trace from the swing low of 19 November 2019 to the 7 May high shows that the weak attempt at recovery of the USDTRY fizzled out at the 23.6% Fibonacci retracement level. This could allow for a pullback move to the 6.68817 support level, if the short-term side trend breaks to the downside. Further support targets lie at 6.65763, and 6.59653.
On the flip side, a recover beyond the 23.6% Fibonacci level allows the pair to aim for the cluster of highs of late April at 6.99821, with 7.08515 waiting in the wings.
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USDTRY Daily Chart
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