USD/TRY outlook: Turkish lira hits new record low vs dollar, eyes psychological 20.00 level

USD/TRY

The USDTRY hit new record high in fresh bullish acceleration after the pair traded within a narrow range, slightly elevated higher consolidation, a part of a larger uptrend from Dec 2021 trough at 10.2017. In addition to overall weakness on slowing economic growth and a record-high inflation, lira was hurt lately by surprise action from Turkey’s central bank, which cut its interest rate by another 100 basis points on the policy meeting last week.

The Turkey’s central bank brought its benchmark interest rate to 12%, disappointing wide expectations for 50 basis points cut, reducing its borrowing cost by 1% for the second consecutive month, after it cut its interest rate by 700 basis points during the past year

The CBRT’s latest decision comes again in strong collision with the fact that inflation in Turkey surpassed 80% and global central banks fight with much lower inflation rates by large-size rate hikes Analysts see the latest policy decision as unsustainable and politically driven, blaming again Turkish President Erdogan for interfering the central bank’s decisions, although his aim is to boost production, exports and investments by lower borrowing cost and turn current account deficit into surplus, which is one of possible actions in fighting high inflation, although conflicting with prevailing trend of a massive increase of interest rates, adopted by a number of central banks.

Eventual break of previous record high brings psychological 20.00 barrier into immediate focus, with break here to generate fresh bullish signal and open way for extension towards 20.2590 (123.6% Fibonacci projection of the upleg from 10.2017).

Res: 18.4635; 18.5485; 18.6009; 19.6333.
Sup: 18.3387; 18.2889; 18.2401; 18.2000.