USD/TRY: Important bottom formed - Rabobank

According to Piotr Matys, EM FX strategist at Rabobank, USD/TRY after suddenly spiking to 5.8788 overnight (according to Bloomberg data as other platforms reported a high above the 6.00 level) has trimmed its gains and the price action implies that an important bottom may have been formed throughout November and December.

Key Quotes

“This in turn could prove a platform for USD/TRY to regain an upside traction in the coming weeks.”

“The 5.46/45 is a crucial pivot to watch in USD/TRY at this stage. A sustained break higher would be an ominous signal for Turkey, which requires a stable lira to avoid a prolonged recession accompanied by persistently high inflation.”

“Apart from unfavourable global backdrop dominated by concerns about China’s slowdown amid the trade war with the US, a bullish breakout in USD/TRY could be triggered by rising market concerns that Turkey could deploy fiscal stimulus ahead of important local elections in March instead of focusing on implementing urgently required structural reforms. Another catalyst could be a premature interest rate cut by the CBRT following deceleration in inflation.”