3rd week USDTRY It doesn’t seem to go up or down. The pair are on the same level and only Turkish Bank can influence the situation. Let’s discuss it and come up with a trading plan.
Monthly Fundamental Lira Forecast
Big opportunities are never small bets! Under this slogan, investors typically invest in emerging market assets. Investors would be totally nervous if a dictator ruled such a state. It is unclear what the president will come up with and how it will affect the economy and financial markets. Recep Erdogan and the central bank he controls have plunged the country into crisis. Theories about the advantage of low interest rates over high inflation do not work. USDTRY price.
The Turkish lira has fallen 40% against the US dollar in the world’s biggest monetary policy divergence since the beginning of the year. While the Fed continues to hike rates to counter multi-decade highs, the Bank of Turkey is cutting rates, but inflation is 10 times higher than his in the United States. Real yields on U.S. Treasurys are slowly rising, while Turkish bonds are falling. In addition to these factors, capital flows to North America are supporting her USDTRY.
US Inflation and Fed Rate Dynamics
Source: Bloomberg.
On October 20, the Bank of Turkey will cut its key interest rate for the third time in a row, according to Bloomberg experts. Now 100 bps from 12% to 11%. This was stated by Finance Minister Nureddin Nabatti, who said this is what the president wants. Recep Erdogan wants the central bank to bring borrowing costs into single digits by the end of the year. According to him, this is done to stimulate economic growth and ensure victory in the 2023 summer presidential elections.
Differences in monetary policy aren’t the only factors supporting USDTRY’s uptrend. In addition to its permanently negative current account balance, Turkey faced her 78.6 billion lira ($4.2 billion) budget deficit in September. August surplus of 3.6 billion lira. If government policies run counter to economic theory, how can we lure foreign investors into local assets and finance a double deficit?
Divergence in Fed and CBRT monetary policies, double budget and current account deficits, and sharply negative borrowing rates should have bottomed out the lira. However, USDTRY fluctuates around 18.55 for 3 consecutive weeks. Apparently, Turkish officials use intervention to stabilize the country’s foreign exchange market.
monthly USDTRY trading plan
This cannot last forever. A 100 bps drop in the key rate from 12% to 11% on Oct 20 could break the resistance at 18.6, USDTRY long deal. Levels 18.8 and 19.1 serve as targets for the USDTRY uptrend.
USDTRY price chart in real time mode
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