USD/TRY Forecast: Signal as the Turkish Lira Collapse Continues

Summary:
• The USD/TRY price surged to a new all-time high this week as concerns about the actions by the CBRT continued.

The USD/TRY price surged to a new all-time high this week as concerns about the actions by the CBRT continued. The Turkish lira collapsed to a low of 18.80, meaning that it has fallen by 41% this year and by 110% in the past 12 months. This makes it the worst-performing G20 currency this year as the GBP/TRY and EUR/TRY have risen.

Turkish lira collapse

The Turkish lira has become worthless as it has collapsed against all major currencies. It has risen by 1,258% since 2008. This means that many Turkish savers have seen the value of their cash depreciate at a remarkable pace. US dollar holders, on the other hand, have had remarkable growth in the same period.

The crash of the Turkish lira has been deliberate. For one, under President Erdogan, the Central Bank of the Republic of Turkey (CBRT) has lost its independence. Today, the Turkish president can hire and fire central banks officials at any time. As a result, most officials now do what he wants, which is lower interest rates. 

Therefore, since the Turkish economy is still vibrant, the CBRT can be able to stabilize the currency and lower hyperinflation if it adopts conventional monetary policies.

The USD/TRY continued rising this month after the CBRT decided to slash interest rates by another 100 basis points. It brought the headline interest rate to 12%, which is lower than last year’s high of 20%. As it did that, the Federal Reserve maintained an extremely hawkish tone. It has raised rates by 300 basis and hinted that it will continue doing so in the final meetings of the year.

USD/TRY forecast

The daily chart shows that the USD/TRY price has been in a slow upward trend in the past few months. It is now hovering at the highest point on record and is slightly above the 25-day and 50-day moving averages. The MACD has remained above the neutral level. 

Therefore, in this case, the trend is your friend, meaning that the pair will likely continue rising. If this happens, the next key resistance level to watch will be at 20. This bullish trend will continue unless the CBRT intervenes by raising rates, which is highly unlikely.