The USD/TRY relentless rally gained steam in early trading as investors reflected on the latest Turkish Central Bank decision. The Turkish lira also plunged after the country’s president threatened to expel some western envoys. It is trading at 9.7367, which is more than 30% above where it was when the year started.
Turkey to expel western envoys
Last week, the USD/TRY price jumped to a record high after the country’s central bank announced its interest rate decision. The bank decided to cut interest rates from 19% to 16%. This was a deeper cut than what most analysts were expecting.
Are you looking for fast-news, hot-tips and market analysis?
Sign-up for the Invezz newsletter, today.
The Turkish central bank has adopted an unorthodox monetary policy. It believes that high-interest rates lead to high inflation. The broadly accepted monetary theory is that a central bank should hike interest rates when the rate of inflation is rising.
The bank decided to cut interest rates for the second straight month as officials reflected on the actions by the country’s president. Two weeks ago, he decided to purge those central bank officials who were opposed to the initial rate cut.
On Monday, the USD/TRY pair rose after relations between Turkey and Western countries deteriorated. This is after Erdogan asked his minister of foreign affairs to expel 9 western ambassadors. This is after those envoys issued a statement calling for a resolution on Osman Kavala who has been in prison since 2017. He has not been convicted of a crime.
Therefore, the Turkish lira plunged because investors expect that the country’s business conditions could worsen if it gets into another conflict with the west. The pair will react mildly to the latest Turkish capacity utilization and manufacturing confidence data.
USD/TRY technical analysis
The daily chart shows that the USD/TRY pair has been in a strong bullish trend lately. This trend got supercharged when it moved above the key resistance level at 8.8160, which was the highest level in June.
The bullish trend has also pushed it above the 25-day and 50-day moving averages while the money flow index (MFI) has moved to the overbought level of 84. Therefore, for now, the pair will likely maintain a bullish trend as bulls target the key resistance at 10.00.
eToro
10/10
67% of retail CFD accounts lose money
Source link