Technical Analysis

Weekly Time Frame:

The Turkish has been under pressure since the end of November of last year. The Greenback appreciated more than 25% over the Turkish Lira.

The chart below shows how the USD/TRY managed to break the trendline (in white) after forming a characteristic pattern called “Cup”.

By recording higher highs, the pair managed to display an all-time high and broke the 7.0850 resistance.

USDTRY Weekly Cup

4-Hr Time Frame

Lowering the time frame, the USD/TRY managed to breakout the 7.0850 mark and closed above it.

After the breakout, the price made a slight rebound to the support (resistance previously). If the pair managed to stay about this level, a further upward move is expected where the Turkish Lira will suffer more. 

However, if the price does not get enough momentum from bulls, the USD/TRY will fall back to the negative territory and leaving a false breakout behind.

To confirm a downward movement, the price must be closed below the 100 SMA (Simple Moving Average).

USD/TRY 4hr Breakout

Fundamentals Analysis:

Many facts led to the depreciation of the Turkish Lira over the last two years.

Turkey’s economy is under massive pressure since it has more than 170 billion dollars as loans. 

Turkish Lira

Part of this loan is to stabilize the local currency by acquiring US Dollars. Recent data shows a decrease in central bank foreign currency reserve from 40 to 25 billion dollars this year.

“Turkey’s Finance Minister Berat Albayrak voiced optimism in a conference call with investors on Wednesday about sealing a swap line deal for forex funding, but he gave few details” several participants in the call told Reuters.

Reuters

Turkey asked for help from the Fed to get more dollars through a currency swap facility.

In addition, the country has been facing high inflation, as well as an increase in unemployment (17%).

The pandemic worsened the economic situation in Turkey and made a negative impact on tourism which the country relies upon heavily.