The USDTRY has hit 2-week highs after data made available to the markets showed that the Turkish economy grew less than expected in the first quarter of 2020. Turkey’s GDP came in at 4.5% on an annualized basis, which was less than the forecast of 5.4%. The figure was also less than the 6.0% growth recorded for the same period in 2019.
Turkey’s economy has been hit by the coronavirus pandemic, effectively shutting down its tourism industry, which is a significant source of foreign currency earnings and jobs for local businesses within its hospitality industry.
The Turkish economy was already facing headwinds before the onset of the coronavirus pandemic. The Turkish government has an external debt of $170billion it would need to service at the end of 2020. Furthermore, the Turkish Lira has dropped 15% against the USD since the start of 2020. The interventions of the Central Bank of the Republic of Turkey (CBRT) have cut the interest rates sequentially since last year, further weakening the currency against the preferred safe-haven US Dollar. The GDP data looks set to pressurize the Lira in the days ahead.
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Technical Outlook for USDTRY
The USDTRY is trading 0.2% higher at 6.8256, following a retracement that took the pair down to the 6.54701 price level. This low represents the 50% retracement from the swing low of 7 January 2020 to the swing high of 7 May 2020.
The price action is currently challenging the resistance at 6.79475, which is where the highs of 6, 8 and 9 April 2020 are found. Yesterday’s daily candle closed above this price level, and a close above this level by the current candle confirms the breakout above this price. This scenario opens the door for the pair to aim for the 23.6% Fibonacci retracement at 6.92460, with further resistance targets located at 6.99821 (cluster of highs of late April 2020) and 7.08515.
On the flip side, failure of the breakout move could allow price to retreat towards 6.71578. A breakdown of this price level will enable sellers to push the pair towards 6.52786 and possible the low of 30 March 2020 at 6.44289. The 61.8% Fibonacci retracement at 6.37824 (lows of 17 March, 27 March and 30 March 2020) could become relevant if further decline breaches 6.44289.