The Turkish lira can’t stop falling. The USDTRY rose to a record high yesterday in reaction to a new government directive to local banks. The pair is now trading at 7.5446, which is a few pips below the yesterday’s high of 7.5592.
The USDTRY, EURTRY, and GBPTRY are among the best-performing currency pairs recently. The three are up by 27%, 35%, and 24% this year alone. That makes the Turkish lira the worst-performing currencies in the emerging markets.
The weakness of the lira has happened mostly because of the government and the central bank. The central bank has lowered interest rates 9 times this year. That makes the country have the lowest real rates in the world. Also, the government has intervened several times in the market to cushion the lira. But its efforts have been self-destructive.
The current surge of the USDTRY happened after the Fed decided to leave interest rates unchanged. The bank also warned that rates will not rise for at least three years, which led to the demand for safer assets. As a result, government lenders sold at least $500 million in the open market. As a result, the lira depreciation is adding more pressure to the central bank to tighten since inflation is already at 12%. Therefore, with the benchmark rate being at 8.25%, it means that the country has negative real yields.
USDTRY technical outlook
The daily chart shows how high the USDTRY has climbed. The pair is trading above all exponential moving averages. It is also above the ascending trendline that is shown in black. Also, the price has just moved above the first resistance of the classic pivot pattern.
Therefore, I suspect that the pair will continue rising as momentum remains against the Turkish lira. If this happens, the next level to watch will be 7.34, which is the R2. On the flip side, a move below the pivot level at 7.1975 will invalidate this trend. This price is also along the ascending trendline.