The USD/TRY has turned in a rather dynamic month of trading as it has consolidated, and has even managed to hold its value stable, but this is likely not a good thing.
The USD/TRY is near the 18.61780 ratio as of this writing. The USD/TRY traded near a high of 18.65500 on the 3rd on November momentarily. On the 7th of November it moved towards a low of almost 18.36350 briefly. The USD/TRY has actually produced a rather consolidated range in the past few weeks and its bullish run upward which has been a long-term suffering event has seemingly cooled.
Perhaps some traders believe the USD/TRY has slowed its bullish pace because of USD weakness which has prevailed in the broad Forex marketplace the past couple of weeks, but that may be wrong. The USD/TRY continues to face many troubling questions regarding Turkey’s fiscal policy and ‘forced’ holding of Turkish Lira within Turkish banks.
Inflation and Export Problems affecting Turkish Economy and the USD/TRY
Criticism of government fiscal policy and central bank mandates regarding interest rates still flourish in Turkey. The USD/TRY has been within the hold of a long-term bullish trend that few other major currencies have had to overcome. Exporting from Turkey has actually slowed as the USD/TRY has gotten more bullish, because the price of export goods coming from the nation have raised because of inflationary pressures making ‘product’s still expensive even as the Turkish Lira has lost value.
Restraints on Banks and Artificial Exchange Rates Created in the USD/TRY
The notion the USD/TRY also remains within close distance of all-time highs is troubling. Yes, the USD/TRY has been able to hold its value, taking its price range into consideration and starting point this November, but this has caused some inside of Turkey to whisper that the exchange rate is not realistic and is being unnaturally weighed down. Meaning there is a significant belief the USD/TRY should be higher regarding the official exchange rate, this if Turkish banks were allowed to actually transact the currency pair freely without restraints.
- If support near the 18.61000 level proves durable in the short term, this could lead to additional movement higher in the USD/TRY and a test of resistance above.
- If resistance around the 18.62000 level proves vulnerable, new highs could develop in the near term.
Dangerous Trading Conditions for Speculators in the USD/TRY
Speculators need to understand even if they believe the USD/TRY should be higher and continue to climb, they are also fighting against official Turkish government fiscal policy. While this has nothing to do with trading the USD/TRY on trading platforms via brokers, it does mean that the exchange rate is problematic. It is quite possible the USD/TRY will climb higher, but it will be a fight. Resistance levels should be monitored, if another flurry of bullish activity advances the USD/TRY new highs could develop quickly. However, traders should note the consolidated range displayed so far in November and consider the cost of pursuing higher values in the USD/TRY if they have to hold the Forex pair overnight.
Turkish Lira Short-Term Outlook:
Current Resistance: 18.62000
Current Support: 18.61100
High Target: 18.63850
Low Target: 18.57800
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