The Turkish Lira can’t get a break of negative news and increased uncertainty in relation to the rest of the world.
The lira has consistently continued to slide on fears over the central bank’s depleted FX reserves, negative real rates, monetary independence, and the risk of Western sanctions over Turkish foreign and defense policies.
The recent victory by Joe Biden in the US Presidential Election will definitely stress the relationship between the countries relations.
The US was already considering economic sanctions, due to the Turkey’s government purchase of the Russian S-400 anti-aircraft missiles, and with Joe Biden in power sanctions will become more apparent.
Europe is also considering further sanction to Turkey, as suggested by French President Emmanuel Macron and other members of the euro, due to Erdogan’s provocations in the Mediterranean Sea and insults against the western world’s freedom of speech issues concerning Islam.
During the weekend the Turkish finance minister, who is also Erdogan’s son –in-law, resigned, citing health reasons according to a statement of his Instagram account. This announcement comes a day after central bank governor was sacked and the opposition parties criticizing the move, saying it would strengthen Erdogan’s influence and politicize the bank.
We are expecting the Turkish lira to continue to lose ground and the USD/TRY pair is poised to surpass 8.5000, above which will then test the 9.00 price level. On the downside, support is held on the 8.40 and 8.30 level extending down to 8.00.
Technical and fundamental factors for the long-term bullish momentum within the USD/TRY are not likely to reverse anytime soon, therefore our forecast for this week is long.