The USDTRY is trading lower today after the Central Bank of the Republic of Turkey (CBRT) delivered a 75bps rate cut, which was more than the 50bps rate cut that analysts had predicted.
As a result, the USDTRY fell by 126 pips in an initial response to the surprise rate cut, but it is now clawing back on some of those losses, resulting in the USDTRY trading at 5.8672 as at the time of writing this report.
Since Murat Uysal took over from Murat Cetinkaya as Governor of the CBRT in 2019, the bank has consistently delivered larger-than-expected rate cuts. Therefore, this month’s rate cut probably did not come as a surprise to the markets. Furthermore, the fact that the deviation between the actual cut and the consensus number was not much (when compared with the last three or four rate cuts) probably contributed to the mute response to this report.
Due to the somewhat muted response of the USDTRY to this news release, the pair has still not been able to breach the symmetrical triangle that is found on the weekly chart. Therefore, the previously identified technical price levels and the outlook remains unchanged.
Price still has a chance to break through any of the triangle’s two borders. However, the bias is for an upside continuation, which brings the August and September 2018 highs of 6.5728 into focus as the initial upside targets in the medium-term.
On the flip side, if the Turkish Lira is able to gain momentum from some of the economic incentives that have so far been applied to the economy, we may see medium-term downside on the USDTRY, which targets the 38.2% Fibonacci retracement from the May 2014 swing low to the July 2018 swing high at 5.18095. A definitive break of the triangle’s lower border with a 3% penetration close is required to confirm this outlook.