- Summary:
- The USDTRY has spiked to the 2nd highest levels ever in its trading history as the coronavirus pandemic strains the Turkish economy to breaking point.
The USDTRY spiked to its 2nd highest levels ever after renewed fears regarding the impact of the coronavirus pandemic on the Turkish economy resurfaced. The effect is already hitting the country’s budget, which has seen a steep rise in the deficit. The budget deficit has quintupled in the space of one month, from 7.36 billion Lira to 43.7 billion Lira, as tourism and tax revenues plummet due to the effects of the coronavirus. A near-total shutdown of international travel means that the flow of tourists, which peaked at 42 million people in 2014 making Turkey the 6th most sought after holiday spot, has all but dropped off, denying the country of crucial revenue.
The Turkish economy is in danger of facing a second recession in less than two years. Just four days ago, the government ruled out any requests for assistance from the IMF. Turkey remains one of the few countries yet to implement any lockdowns, and the effects seem to have started to show. Not only is Turkey now seeing a steep rise in new coronavirus cases to 4,000 per day, but it ranks number 1 in terms of the rate of the percentage of new coronavirus infections globally.
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Technical Outlook for USDTRY
USD/TRY is trading 3.7% higher this week and is now at the 6.93601 price level. Only the peak of August 2018 at 7.08310 has ever surpassed this price level in the trading history of the USDTRY. The gradual widening of the deviation of the price action from the bullish Kumo on the daily chart shows just how much upside momentum exists on the USDTRY. Immediate resistance at 6.79475 is in danger of being overcome if the USDTRY’s weekly candle can maintain the 3% penetration it currently has over this price level until the end of trading tomorrow. If this closing penetration is maintained, the pathway is open for the USDTRY to target the previous all-time highs of August 2018. There is the possibility that this level could be surpassed if things continue as they are.
Only a weakening of the US Dollar could provide some respite for the Turkish Lira within the USDTRY pair. If the weekly candle is unable to maintain the 3% penetration required for a breakout and the pair can pull back below the 6.79475 resistance, then we could be in for a retest of the 6.52786 price support. The 30 March low of 6.44289 may act in a role reversal to provide extra support. Below this level, 6.18842 (23.6% Fibonacci level from the swing low of 4 September 2017 to the swing high of 13 August 2018) may also become relevant to any profit-taking retracement moves.