Enclosed our view of USD/TRY and USD/MXN which we looked at in a previous post, we are flat and have adjusted our entries and targets…
“Turkey’s central bank ramped up its key interest rate by a whopping 475 basis points to 15 percent and pledged to remain tough on inflation on Thursday, meeting lofty expectations after President Recep Tayyip Erdogan installed a new governor and heralded a new economic approach.”( ALJAZEERA)
The Central Bank’s 4.75 percentage-point rate increase to 15 percent on Thursday has turned the lira into one of the highest yielding currencies in emerging markets. The central bank has also simplified monetary policy and it will lend from now on at the single 15 percent rate.
The Central bank also said interest rates would remain high for an extended period until inflation is reduced. Annual consumer price inflation in Turkey stands at 11.9 percent. The interest rate hike will hurt the economy which has already taken a big hit from COVID.
USD/TRY Holds Key 7.500 Level
The USD fell after the meeting but has now steadied above the key 7.50 level and after the heavy fall into and after the meeting we would expect some upside. Also, we are looking for risk on in the markets to end as per our previous blogs which will hit emerging market currencies and expect a broad-based USD rally.
USD/MXN Holding Above Key Support at 20.00 As Volatility Drops
Volatility is generally low in the FX markets and in the normally volatile USD/MXN we have seen little action over the last week as we trade in low volatility above the key 20.00 weekly support level. The low volatility points to a big move and we think it will be to the upside as the USD corrects its oversold condition and carry trades exit the market.
USD/TRY DAILY CHART: After falling after the Central Bank Interest rate announcement we have steadied above the 7.500 level. We would expect some USD upside from here to the 20 Day MA to correct oversold – we view the USD as a buy above nearby resistance for a move back to 8.00.
USD/MXN DAILY CHART: The 20.00 level is key weekly support, and we are trading above it in low volatility. The USD is at a bearish extreme and speculators are heavily short – we expect a move above nearby resistance to end the low volatility and trigger a short covering rally up to the 22.00 level.
Research provided by LCTO
The given data provided contains additional information, forecasts, analysis and market reviews published on the Key to Markets website.
Before making any investment decisions, you should know that:
– Key to Markets publishes analysis of any kind solely for information purposes and should not be construed as investment advice or recommendation.
– Key to Markets will not be liable for any loss or damage arising from any such decision.
– Whilst all reasonable efforts are made to ensure that all content sources are reliable and that all information is presented, as far as possible, in a comprehensible, timely, accurate and complete manner, Key to Markets does not guarantee the accuracy or completeness of any information contained in the analysis.
– Before making any investment decisions you should understand how leveraged products work as they are speculative in nature and may result profit and losses. Please, before starting to trade, you should make sure that you understand all the risks.