USDTRY hit two-month highs as the pressure to Turkish lira continues after the central bank of Turkey (CBRT) the previous week cut the interest rates by 200 bps to 12% from 14% below the analysts’ consensus of an interest rate cut to 12.5%.
The central bank noted that recovery in Turkey’s economic activity continues while the global economic outlook weakens amid trade tensions. CBRT reiterated that would continue to use all instruments to achieve its monetary targets, the price and financial stability.
The central bank of Turkey (CBRT) cut interest rates by 250 basis points, in its previous policy meeting to 14%. In 2019 the CBRT cut interest rates by 9.5 percentage points in an attempt to revive Turkey’s struggling economy.
Interest Rate Cuts Helped Economy
Latest economic data point that the rates cuts have helped the economy. The three-month quarterly jobless average dropped from previous 14% to 13.8% in September. The Unemployment rate jumped to 14.0% in August, the highest jobless reading since March. The Budget Balance increased to 7.8B in November from the previous reading of -14.9B.
Last week, Turkey’s Economic Confidence Index came in at 91.3 for November beating forecasts of 89.8.
USDTRY technical outlook is bullish as the pair after it tested successfully the 50-day moving average at 5.7772 on Friday and run up to two-month highs. As of writing USDTRY trades 0.50% higher at 5.8503, enhancing the bullish momentum.
On the upside now, first resistance stands at 5.8510 the daily high, while a break above will drive the attention to next resistance at 5.8650 the high from October 21st. If the pair breach that level then a move up to 5.9163 the top from October 16th is possible.
On the other hand, immediate support for USDTRY stands at 5.8185 the daily low. A break below the daily lows will pave the way for 5.7774 the 50-day moving average that provided the Friday’s rebound. Next level for USDTRY to watch on the downside is the December 6th low at 5.7466.
The overall bias is bearish for Turkish Lira as the interest rate cuts and military action will continue the currency under pressure.