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 Markets 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.
Start trading forex today
Trade the largest and most volatile financial market in the world.
- Spreads start at just 0.6 points on EUR/USD
- Analyse market movements with our essential selection of charts
- Speculate from a range of platforms, including on mobile
Live prices on most popular markets
- Forex
- Shares
- Indices