- USD / TRY posted a sharp pullback to the upside on Monday, despite positive rhetoric from the CBRT governor.
- The pair appreciated more than 3% on the day, climbing above last week’s highs around 7.80 to get closer to 7.90.
The USD/TRY it rallied higher on Monday, rebounding from Monday’s Asian session opening levels at 7.6210 to a high of 7.9472, before falling back below the 7.9000 level in the most recent trade. The pair is currently trading with gains of just under 2500 pips on the day or more than 3%.
TRY ignores positive rhetoric from CBRT governor
The Turkish lira saw a significant depreciation against the US dollar on Monday despite apparently positive comments from CBRT Governor Agbal; The economic recovery is expected to continue through the rest of the year, albeit at a slower pace, he said, adding that he sees a “pretty strong” possibility of positive growth in 2020. TRY was not buying it and continued to depreciate against the USD, and since then it has settled around the pre-CBRT rate hike levels of last week (about 7.9000).
CBRT minutes from last week’s meeting due Thursday, as well as CBRT’s financial stability report on Friday: TRY bulls will be waiting for a confidence-inspiring message from both (will there be more rate hikes?).
USD / TRY breaks above downtrend and key resistance
Technical buying is likely to play a major role in USD / TRY’s advance north on Monday, with two key resistance areas broken.
When European traders hit their desks around 06:00 GMT Monday morning, USD / TRY surged above a key short-term downtrend linking the Nov 9 low and 12 highs, 17, 18 and 20 that, until that moment, had been well respected.
As the buying gained momentum and carried the pair above this trend line, which came into play around 7.67, USD / TRY also crashed through a key resistance level around 7.80 (low of 22 October and November 11, as well as November 17 and 18. Highs). That opened the door for a run into resistance around 7.95 (the highs of October 9, 14 and 16), although sellers managed to regain control just before this level pushing the pair below 7.90.
Above the 7.95 resistance level, 7.98 is also significant (October 22 high and November 9 low), as is, of course, the psychological level of 8.00. A break above these levels would open the door for another run to the all-time high just below 8.60, albeit with CBRT’s credibility seemingly returning now that the central bank has a new governor and is moving forward to tackle rampant inflation, the TRY’s fundamental backdrop is slightly less desperate than the last time it was at these levels.
Still, some more decent CBRT rallies might be needed to regain enough confidence to send the coin back to the 7.00 lows.
4 hour chart
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