The USDTRY continues to extend its gains this Tuesday as President Recep Erdogan announced an extension of lockdowns that were imposed for the first time over the weekend due to Turkey’s coronavirus crisis. Turkey has for the past week and a half, had the fastest percentage rise in the number of new coronavirus cases. Lockdowns were initially not implemented, so the latest move by the President has been viewed by the markets as a sign of admittance that Turkey’s coronavirus situation is much worse than policy makers were letting on.
Bearish pressure on the Turkish Lira is also coming from the expectation of a 50 bps cut by the Central Bank of the Republic of Turkey (CBRT) in its latest meeting tomorrow. The CBRT has delivered a rate cut since Murat Uysal took over from Murat Cetinkaya as Governor in 2019. Last month, the CBRT delivered a 100 bps rate cut in a meeting that took place earlier than usual as the economy struggled with dwindling revenues from its coronavirus-impacted economic activities.
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Technical Outlook for USDTRY
The USDTRY is trading at 0.91% on the week, having touched off a weekly high of 6.98278. This is the 2nd highest level ever attained by the pair, and it is logical to expect a further bullish run from tomorrow’s rate decision to target the August 2018 all-time highs at 7.08310. Further ascent beyond this price level may result if the CBRT cuts interest rates by more than 50bps.
A less aggressive cut of the interest rate or one which meets expectations may allow bulls on the USDTRY attempt some profit-taking, which could lead to a pullback on the USDTRY towards support areas at 6.79475 and 6.52786 respectively. The highs of 17 September 2018 and 6 May 2019 may also present new support targets at 6.44289 and 6.24258 respectively, if the pullback is able to breach 6.52786 convincingly.
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