Dovish comments from Turkish President Recep Erdogan are weighing on the Turkish Lira this Tuesday, as the USDTRY hits one-week highs at 5.26935. The pair is currently up by 0.48% on the day after President Erdogan has been quoted as saying that the Turkish economy must continue to keep the wheels turning amid the coronavirus pandemic. Market participants are taking his statements as a signal that the Central Bank of the Republic of Turkey (CBRT) may ease interest rates yet again.
The CBRT has seen its independence eroded after Erdogan ousted former Governor Cetinkaya for opposing the former’s monetary easing standpoint. Ever since, the CBRT has been n an easing cycle, reducing interest rates at every single meeting held since then. The CBRT has also cut rates on an emergency basis to cope with the economic fallout of the coronavirus crisis. The CBRT has also responded to the crisis by lowering the interest rate cap chargeable on credit card debts. Interest rates charged on loan defaults have also been cut from 1.7% to 1.55%, in an attempt to provide relief to small businesses and households.
Recent statistics show that Turkey has 10,827 reported cases of the coronavirus. This puts it in the 12th position among countries most affected by the coronavirus in the world.
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Technical Outlook for USDTRY
The USDTRY had earlier in the day, hit tops of 6.60048. However, it has now pulled back slightly and is at a point where it is mounting a challenge to the immediate resistance level at 6.52786. A 3% penetration close above this level by the weekly candle confirms the breakout, allowing the USDTRY an opportunity to target the 6.794756 resistance (27 August 2018 high). 7.08515 constitutes a further resistance up north.
On the flip side, a failed break of 6.52786 allows a pullback to the 6.24258 support, formed by previous highs of 6 May 2019 and 2 March 2020, acting in role reversal.
5.97902 lurks underneath and could become relevant if price is able to pull back below the March 2020 lows.
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