The Lira continues to extend its gains against the US Dollar, as cheap investment dollars now seeks emerging market currencies that have a higher interest rate and therefore are capable of producing a higher yield.
This carry trade scenario appears to favour the Lira in its pairing with the US Dollar, as the nearly 16.9% interest rate differential between both currencies seems to favour this approach pretty well. A weaker greenback across the board has helped drive down the USDTRY nearly 19% from its 6 November 2020 all-time highs.
The pair now looks towards the CBRT decision on Thursday for further direction, as the pair looks set to post a 6th straight losing session. The CBRT is expected to leave interest rates unchanged at 17%, with the M. Agbal-led CBRT likely to perform a reassessment of existing measures before deciding on a shift in interest rates.
Technical Levels to Watch
The USDTRY has attained the 6.89410 support mark, which marks the completion of the projected measured move from the breakdown of the bearish flag spotted in January 2021. Further descent of the USDTRY depends on sellers taking out this support. If this is successful, then 6.68817 becomes the new target, followed by 6.59653 and 6.38548, in that order.
On the flip side, an extension of the bounce to the upside signals completion of the measured move, and brings in 6.99821 into the picture as the immediate upside target. A further advance in the pair brings in 7.08515, with 7.19656 and 7.26356 lining up as additional targets to the north.
USD/TRY Daily Chart