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USDTRY Could Strengthen Further as Concerns About Turkey Persist

USDTRY Could Strengthen Further as Concerns About Turkey Persist

2018-07-03 15:20:00
Martin Essex, MSTA, Analyst
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USDTRY price, news and analysis:

- After a period of relative stability, USDTRY has begun to strengthen again.

- That advance could well extend further as concerns about Turkey refuse to go away.

Our trading forecasts for Q3 have just been published; you can find them here.

USDTRY advance could extend further

After surging from around 3.80 back in March, USDTRY jumped briefly to above 4.90 in late May before stabilizing in a broad range between 4.45 and 4.80. Over the last couple of sessions, however, it has begun to edge higher and that advance could well continue.

The Turkish Lira has been hit by high inflation, political concerns after the reelection of President Recep Tayyip Erdoğan and by the rising price of crude oil given Turkey’s position as an importer. The country’s inflation rate rose to 15.4% year/year in June, a 14-year high, according to data released Tuesday, and that helped drive the Lira lower for a second successive day.

It has also suffered from US President Donald Trump’s demand that its allies stop buying oil from Iran – a call that Erdoğan has rejected.

USDTRY Price Chart, Daily Timeframe (March 4 – July 3, 2018)

Latest USDTRY price chart.

Chart by IG

The risk now is that the latest rise in USDTRY continues, with the 4.7763 high touched on June 19 an initial target. If that breaks, it could climb back to the 4.9299 high reached on May 23. Meanwhile, to the downside, there is support at the 4.5358 June 25 low and then at the 4.4477 May 30 low.

While the much stronger than expected June inflation data could prompt an interest rate increase of 100 basis points at the central bank’s meeting later this month, it is not clear that such a hike would stabilize the currency. Indeed, it could exacerbate the Turkish economy’s weakness, adding to the upward pressure on USDTRY, which now looks likely to climb still higher.

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--- Written by Martin Essex, Analyst and Editor

Feel free to contact me via the comments section below, via email at martin.essex@ig.com or on Twitter @MartinSEssex

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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