USDTRY
USDTRY hovers to the unchanged mark after the central bank of Turkey cut the interest rates for ninth time in a row by 50 basis points to 8.25% in an attempt to boost the coronavirus battered economy. Markets widely expected the move and the USDTRY didn’t react on the news.
Turkish lira managed to rebound from the recent lows as Turkey’s economy returns gradually to normality and the sentiment improves for the lira. Turkish lira managed to rebound from historic lows that hit early in May amid the deterioration in the country’s currency reserves and foreign financing needs.
Turkey’s interest rate is now negative as it stands at 8.25% while the annual inflation runs at 10.9%.
Economists argue that the consecutive interest rate cuts put extra pressure to Turkish lira and the economy. Many companies in the country have high debt exposure in foreign currencies, and that might pressure CBRT to reverse the monetary policy easing. The foreign currency-denominated debt increased speculation that Turkey is approaching a currency crisis. Turkey’s companies held $177.6 billion in foreign currency debt as of March this year, according to the most recent figures from CBRT. 61.8% of this debt was denominated in dollars, 33.5% in euros, 3% in Turkish lira, while the remaining 1.8% was held in a variety of other foreign currencies.
International Monetary Fund (IMF) predicts that Turkey’s economy may contract by 5% this year.
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USDTRY is 0.04% higher at 6.7946, as the pair correction from the recent highs stalled above the 50-day moving average. The technical picture remains bullish for the pair despite the recent sharp correction. Only a break below the 50-day SMA might cancel the bullish momentum for the short term.
On the upside, initial resistance for USDTRY stands at 6.8112 the daily high. If the pair breaks higher, then the next resistance will be met at 6.8732 the high from May 19. If the bids persist, the next target will be met at 6.9686 the high from May 14.
On the flip side, the immediate support for USDTRY stands at 6.7864 the daily low. The next support area stands at 6.7626 the 50-day moving average. More bids might emerge at 6.6630 the low from April 10.