USDTRY: Bears in Control

USDTRY gives up over 0.57 percent despite Turkey’s Central Bank (CBRT) cut the one-week repo auction rate by 425 basis points to 19.75% from 24% last week. This was a more aggressive rate cut than market expectations. The economist’s expectation was for an interest rate by cut by 250 bps from the 24% level. CBRT noted that released data indicate that there is a moderate recovery in economic activity in the country. It also noted that the external balance is being impacted positively by the composition of growth, and that the “weaker global economic activity has strengthened the possibility that advanced economy central banks will take expansionary monetary policy steps. The Central Bank of Turkey based the cut on interest rates on the solid momentum of tourism revenues and increasing exports, despite the backdrop in the domestic current account.

Fitch Downgraded Turkey to junk status, and warned of deteriorating independence and economic policy credibility after President Erdogan removed Cetinkaya as his central bank chief last week. Governor Cetinkaya, whose term was due to 2020, was replaced by deputy Murat Uysal, who was the deputy governor for three years and is one of the more dovish members of Policy Committee.

TRY lost over 7 percent of its value against USD this year, the worst performer in emerging currencies after the Argentine Peso (ARS). On the technical side the USDTRY will find support at 5.5350 the low from April 4th while more bids will emerge at 5.4575 the low from April 1st. On the upside first resistance stands at 5.6180 the 150 day moving average, then at 5.6736, the 50 day moving average, while more resistance will be met at 5.7683 the 100 day moving average. The pair will face the Fed policy decisions tomorrow that will add to volatility, so traders have to be very cautious.Don’t miss a beat! Follow us on Twitter.