USDTRY
USDTRY adds 0.33% higher at 5.7496 after the central bank of Turkey cut interest rates down by 250 basis points, above the market expectations, to 14%. That will make happy President Tayyip Erdogan who pressured central bank (CBRT) to cut interest rates as he wants rates to be back in single digits. Meanwhile, as the Turkish army operations in the borders with Syria continues the risks for Turkish lira and trade balance increase to the downside. If tensions between Turkey and USA keep escalating, CBRT might have to consider further rate hikes to stop the fall of Turkish lira.
CBRT delivered in its previous meeting a 325bp interest rate cut to 16.50% more than markets expected. CBRT slashed borrowing costs by 7.5 percentage points since July in an attempt to revive growth.
On the technical side, USDTRY short term outlook is bullish despite the recent correction from three-month highs, as the pair holds above all major daily moving averages. The bull run from 5.45 August 8th lows stopped mid-October at 5.94. USDTRY accelerated the upward move after the price pierced the descending trendline from May 23rd. Looking north, immediate resistance for the pair stands at 5.7622 today’s high while a break above might drive prices for a test of the next support at 5.859 the high from October 21st.
On the flip side first support stands at 5.7316 today’s low, then at 5.7204 the 100-day moving average, while more pressure will emerge at 5.6642 the 200-day moving average. All in all USDTRY outlook is positive as CBRT interest rate cuts and military action will continue to pressure Turkish lira.