USD/TRY: Bullish breakout - Rabobank

The Turkish lira is once again under selling pressure falling sharply against the US dollar to a new year-to-date low and weakening versus the euro to a record low, points out the research team at Rabobank.

Key Quotes

“While the external backdrop is less conducive for risky assets due to prevailing concerns about Trump’s protectionist trade tone, the lira’s sell-off was triggered by higher than expected current account deficit published on Monday – a timely reminder of Turkey’s reliance on capital inflows to cover its substantial gap.”

“In addition to that, the sharp squeeze in Turkish bond yields indicates that at least some investors decided to reduce their exposure to local papers following relatively slow disinflationary trend with the headline inflation surprising on the upside.”

“Consequently, USD/TRY gained sufficient upside traction to penetrate previous important tops at 3.8485/8452. Looking from the perspective of technical analysis, the sharp move higher in USD/TRY can be interpreted as a bullish breakout and a constructive signal we have been waiting for.”