Turkish Central Bank Decision and Volatile Shadows

The USD/TRY has sustained its jump higher which took place on Tuesday after rumors began to swirl that the Central Ban of Turkey would be less aggressive than anticipated previously.

As of this writing the USD/TRY is trading near the 26.92750 ratio and readers are urged to look at the live price of the currency pair to gauge market conditions.  The Central Bank of Turkey will release its rate decision at 11:00 GMT today. As you read this article it is likely the decision has been made already. For several weeks financial institutions had been anticipating a hike that would take the key borrowing rate in Turkey to 20%. However early this week rumors started to circulate that the Turkish central bank would be less aggressive than expected.

On Tuesday of this week, the USD/TRY was trading politely within a known range with rather quiet incremental movement higher as has been the case with the currency pair since the last week of June. Speculators of the USD/TRY have actually had the ability to look for small reversals lower in the USD/TRY over the past handful of weeks as the Forex pair has turned into a market exhibiting ‘normal’ conditions.

The sudden jump on Tuesday in the USD/TRY from about 26.32400 to a value of nearly 26.90000 in less than an hour likely caught many day traders unprepared.  As always it is crucial to use risk management when trading the USD/TRY. The Turkish central bank has likely acted as you are reading this article, and you are encouraged to look for news regarding the interest rate decision that has taken place. If the Central Bank of Turkey didn’t fulfill the wishes of many financial institutions and raise the interest rate substantially in order to try and curb domestic inflation, a rather volatile reaction has likely ensued.

Confidence in the USD/TRY has gotten better the past four weeks, but today’s actions by the Central Bank of Turkey will provide traders with proof that Turkey is serious about taking care of its economic challenges or that it simply continues to speak empty words. The 27.00000 level should be watched by for traders. And speculators also need to understand some of the upwards momentum and higher price attained by the USD/TRY on Tuesday has already anticipated a smaller interest rate hike than the one wished for by financial institutions. Volatility will certainly be seen today and tomorrow in the USD/TRY.

• If the Turkish central bank doesn’t raise its interest rate aggressively today, the USD/TRY could see another move higher in the near term.
• Speculators need to understand the fundamental economic fears that exist regarding the management of the Central Bank of Turkey. Risk management needs to be fully engaged by traders.
• Today’s decision will say a lot about the direction the Turkish government is undertaking to solve problems or to try and sweep concerns under a rug.

Current Resistance: 27.00000

Current Support: 26.90000

High Target: 27.15000

Low Target: 26.50000

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