EUR/TRY skyrocketed today after Turkish President Recep Tayyip Erdogan defended the massive and continuous interest rate cuts amid double-digit inflation. He said that this is part of an “economic war of independence”, rejecting calls from investors and analysts to adopt a different strategy.
Inflation is now near 20% in Turkey, and against any orthodox monetary policy practices, the Turkish central bank has cut interest rates by 400bps since September, with the latest one being a 100bps, delivered last week. This, combined with investors fear over the lack of independence of the Turkey’s central bank, has resulted in a 40% drop in the lira this year, and 20% since the start of last week alone.
From a technical perspective, EUR/TRY is trading above an upside support line since November 15th, and today’s rally took it above yesterday’s high of 12.92, with the rate now trading slightly above 14.00. Obviously, the picture looks as positive as it can get and thus, we would expect the rate to continue conquering fresh highs. With no prior highs or inside swing lows to mark any potential resistance zones, we will mark as such the psychological territories of 14.50 and 15.00.
Now, in order to abandon the bullish case and start examining a bearish reversal, we would like to see the rate dropping all the way back below 12.25, near Friday’s low. The rate would already be below the aforementioned upside line and may the first confirmation of a lower low in a long time. The bears may then get encouraged to dive towards Thursday’s low, at 11.83, the break of which may allow extensions towards the inside swing high of November 15th, at 11.53, or even the low of November 12th, at 11.27.
Disclaimer:
The content we produce does not constitute investment advice or investment recommendation (should not be considered as such) and does not in any way constitute an invitation to acquire any financial instrument or product. The Group of Companies of JFD, its affiliates, agents, directors, officers or employees are not liable for any damages that may be caused by individual comments or statements by JFD analysts and assumes no liability with respect to the completeness and correctness of the content presented. The investor is solely responsible for the risk of his investment decisions. Accordingly, you should seek, if you consider appropriate, relevant independent professional advice on the investment considered. The analyses and comments presented do not include any consideration of your personal investment objectives, financial circumstances or needs. The content has not been prepared in accordance with the legal requirements for financial analyses and must therefore be viewed by the reader as marketing information. JFD prohibits the duplication or publication without explicit approval.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 68.02% of retail investor accounts lose money when trading CFDs with the Company. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Please read the full Risk Disclosure.
Copyright 2021 JFD Group Ltd.