USDTRY Rises in Classic Playbook of Contrasting Fundamentals

In a tale of contrasting economic fundamentals, the US initial jobless claims declined for the second week in a row, even as Turkey’s manufacturing PMI fell slightly in September to 52.8. Consequently, the USDTRY resumed upside momentum this Thursday and has pushed towards the 7.73 price area with a few minutes to the start of the New York session. 

According to data released this afternoon by the US Department of Labor, the number of first-time claims made by recently unemployed Americans fell from the previous figure of 837K (an upward revision) to 837K. This figure was lower than the market estimates. 

The 4-week average now shows a decrease of 11,750 from the previous moving average figure. This brings the total number of claims for all unemployment benefit programs to 26,529,810; nearly 18.6 times more than for the same period in 2019. 

On the other side of the coin, the Turkish Lira gave back yesterday’s gains after a drop in the manufacturing PMI from 54.3 in August to 52.8 in September. Turkey’s covert support for the Azeri forces in the Armenia-Azerbaijan conflict over the disputed region of Nagorno-Karabakh is proving to be a geopolitical risk to the Lira, as speculators have increased their selling of the currency. 

Despite the not-so-upbeat jobless claims data, the USD has been able to re-establish control over the Lira, which remains one of the worst-performing currencies in 2020.

Technical Outlook for USDTRY

The swing move from the 25 March low to the 7 May high throws up several Fibonacci extension levels. The 127.2% Fibonacci extension serves as the current resistance, following the all-time high attained on 29 September 2020. 

The doji candle of that day was part of the evening star pattern, which looked set to provoke selling on the pair until today’s news changed the market sentiment. This price level remains the area to beat for bulls, and if the 7.83450 resistance is broken, the USDTRY enters new record-high territory. 7.96235 (141.4% Fibonacci level) would then be a potential target.

On the flip side, a lack of follow-through buying following today’s uptick could allow the pair to challenge the 7.58570 support, with 7.39840 and 7.26356 lining up as potential downside targets.  

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USDTRY Daily Chart

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