CFDs are a leveraged product and can result in losses that exceed deposits. Please ensure you fully understand how CFDs work and what their risks are, and take care to manage your exposure. CFDs are a leveraged product and can result in losses that exceed deposits. Please ensure you fully understand how CFDs work and what their risks are, and take care to manage your exposure.

USD/TRY could be primed for a bearish reversal in emerging market recovery

USD/TRY weakness seen in the wake of Erdogan's firing of their central bank chief may be fading, yet the shift towards emerging markets could benefit the lira over the coming months.

Turkish Lira finds buyers as Erdogan sacks central bank head

The weekend announcement from Turkish President Recep Tayyip Erdogan saw both the central bank and treasury heads laid off in response to a huge lira devaluation in recent years. Known for his somewhat unorthodox approach to monetary policy, Erdogan will hope that any new appointments will help to shift the emphasis towards an environment where the Lira could appreciate to lower the value of dollar denominated debt held by the country.

Initial signs of a reversal came through yesterday, with the USD/TRY pair tumbling to lay the ground for the biggest decline since 2018. However, we are seeing crack appear in that argument, with the pair already starting to recover after finding support on the confluence of Fibonacci and trendline support. This does highlight the fact that we remain some way off seeing tangible action that will shift the dial in favour of the lira. With this USD/TRY bull trend having persisted for over a decade, it will take something substantial to bring a more confident bullish outlook for the lira.

Nevertheless, what could benefit the lira is perhaps not the changes made by Erdogan, but instead the recent US election and Pfizer vaccine breakthrough. These two changes taken in conjunction with eachother could bring about a shift towards emerging market currencies as traders see a move out of the haven dollar towards riskier assets.

With many emerging economies holding substantial dollar-denominated debt, such a dollar devaluation could similarly help those economies by lowering the value of their debts. While the USD/TRY chart clearly remains within a bull-trend, it could be worthwhile watching for a potential breakdown below the ₺7.7794 level to bring about a fresh bearish reversal signal for this long-standing uptrend.

This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.

Start trading forex today

Find opportunity on the world’s most-traded – and most-volatile – financial market

  • Trade spreads from just 0.6 points on EUR/USD
  • Analyse with clear, fast charts
  • Speculate wherever you are with our intuitive mobile apps

See an FX opportunity?

Try a risk-free trade in your demo account, and see whether you’re onto something.

  • Log in to your demo
  • Try a risk-free trade
  • See whether your hunch pays off

See an FX opportunity?

Don’t miss your chance – upgrade to a live account to take advantage.

  • Get spreads from just 0.6 points on popular pairs
  • Analyse and deal seamlessly on fast, intuitive charts
  • See and react to breaking news in-platform

See an FX opportunity?

Don’t miss your chance. Log in to take your position.

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

Plan your trading week

Get the week’s market-moving news sent directly to your inbox every Friday. The Week Ahead gives you a full calendar of upcoming economic events, as well as commentary from our expert analysts on the key markets to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.