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Finally, it seems that the Ankara government has surrendered and has consented that the Turkish Central Bank would raise the reference rates, during an emergency meeting, of over 300 basis points. Now the rates are at 16.5% and the central bank and the government said they were ready to use any instrument at their disposal to stop the depreciation of the Turkish Lira (TRY)
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which lost about 17 % against the dollar from the beginning of the year. The market reaction was immediate and violent, as can be seen from the graph
The exchange rate with the US Dollar (USD) has reached almost 4.5 since 4, 9 : the appreciation was, therefore, of more than 8%, a real rarity for the Forex market, even considering that it took the form of a very short period of time. After a few hours, however, the Turkish currency began to lose ground again and now seems to have almost halved the gains from the news of the rate hike.
From a graphic point of view we could find ourselves facing a typical example of training "Head and shoulders", in which the neckline is bullish like the medium-term trend. The Turkish story, however, must be monitored carefully because the exchange rate is very much influenced by political news and although there is a high spread between ask and bid prices can be a source of great satisfaction for a trader who is attentive to the flow of news. In this context the upcoming elections on 24 June will be a source of high volatility and potential large gains.
Particular attention must be paid, among other things, to political-electoral polls. If the latter were to delineate the possibility of a high political fragmentation, of an unstable government with a weak majority, the exchange rate should be negatively affected and the breakdown of the 5 $ share would be almost certain.
, we should fear the possibility of forming a large majority, of whatever color it is, the exchange rate should react favorably. Finally, the best scenario, that could imply a return of the exchange rate under the $ 4 for Turkish Lira could be that of a strong affirmation of a party more open to the free market and moderate of the AKP of Erdogan, which is currently in power.
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Source: IQOption blog 2018-05-24 16:07:13
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Sunday, September 13, 2020