The Turkish Lira came under renewed pressure this Monday as the USDTRY surged to 18-month highs on the back of mounting economic pressures arising from the coronavirus outbreak. With a total of 27,069 cases and 574 deaths, Turkey remains one of the worst-hit countries and has moved up the rankings from the 12th to the 9th position in terms of the coronavirus-affected countries.
Weak economic data and President Erdogan’s comments last week on the need to keep ramping up efforts to jumpstart the economy (which many see as a veiled reference to ease rates again) started the renewed round of weakness on the Turkish Lira. Investors now fret over the country’s ability to deal with the impact of the coronavirus.
The financial markets are also concerned that the use of rate easing as a tool for stimulating the economy is beginning to lose steam. Turkey’s foreign reserves are also being depleted as the country struggles to deal with dwindling revenues from tourism and other revenue earners, all negatively impacted by the coronavirus pandemic. Broad-based USD strength which continues to spill over from last week despite the grim NFP numbers is also helping to ramp up the pair.
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Technical Outlook for USDTRY
The USDTRY is now testing the 6.79475 resistance, formed by the weekly candle ended August 27, 2018. This is the 2nd highest price peak formed by a weekly candle in the USDTRY’s history. This move represents a 0.97% gain on the day. If the pair can surmount this resistance via a 3% penetration close of the weekly candle, or a double successive penetration close by the daily candles, the stage will be set for the USDTRY to aim for its previous all-time highs at 7.08515 in the medium-term. 6.8055 represents a shorter-term resistance target that could act as a pitstop for any price surges beyond the present levels.
If the resistance rejects the USDTRY successfully, this may open the door for some profit-taking pullbacks that could send the pair towards September 10, 2018 highs at 6.52786 in the first instance. Further support lies at 6.44289 as well as 6.24258 (October 1, 2018 and May 6, 2019 highs).
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