USDTRY Outlook: Turkish lira at front foot after CBRT surprise 625bps rate hike but overall picture remains bearish

USDTRY

Turkish lira rose to new 2 1/2 week high against the dollar after Turkey's central bank surprised on higher than expected rate hike on today's monetary policy meeting. The CBRT increased one-week repo rate to 24% on 625 basis points hike, beating wide expectations for 425bps increase. The lira dipped around 3% in hours preceding the central bank's decision as speech of President Erdogan spiced up the sentiment. Erdogan said that the central bank is independent but stressed that his sensitivity towards interest rates hasn't changed and that high interest rates harm the economy. The lira fell to session low at 6.5516 on Erdogan's remarks but quickly regained traction after CBRT's surprise. The central bank did what was required to tackle double-digit inflation in the proper way, however, lira stays away from its 16 Aug high at 5.6875, posted on strong pullback from new record low at 7.1074 (13 Aug). Also, lira stands far below highs at 4.45 zone, hit after last CBRT's 425bps hike in June. This suggests that lira remains in troubles and vulnerable of further losses, as sentiment remains negative, after the latest measures from Turkey's government who ordered all property transactions must be paid in Turkish lira. The USDTRY pair probed below pivotal support at 6.2020 (Fibo 38.2% of 4.7372/7.1074) with daily close below needed spark further downside. Key supports lay at 5.6875 (16 Aug low) and 5.6426 (Fibo 61.8%) with sustained break lower to generate reversal signal. However, lira remains weak and it is a question how long it could hold positive post-CBRT sentiment. Early lira's bulls stall would risk fresh renewed weakness and may turn focus towards all-time low again.

Res: 6.2020; 6.2719; 6.4865; 6.5516
Sup: 6.1530; 6.0093; 5.9223; 5.6875