2018/05/23 Special Alert: Turkish Lira
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Special Alert: Wednesday, May 23, 2018
Turkish Lira
It is most interesting to see consistent weaker sister Turkish lira weaken still further at various points when other emerging currencies (which have also reverted to weakness over the past month-and-a-half) have attempted to stabilize at times. And the current lira weakness goes beyond just relatively weaker activity against the US dollar and other developed currencies it had seen since mid-March. To paraphrase the stock market assessment of ex-Fed Chair Alan Greenspan (and colleagues as evidenced in the transcripts from his mid-1990’s Federal Reserve), it seems at this point the Turkish lira has completely “slipped its moorings.” Yet as the Turkish government of President Recep Tayyip Erdoğan has gone a long way toward discarding various Western governmental and financial norms, it is less a surprise and more so a dilemma of how to view it.
While we will directly return to an overview of the reasons the lira is acting so weak (even so much weaker than other emerging currencies that also have reason to sag at present), first note the opening USD/TRY monthly chart. It can be enlarged by clicking on it, and also possibly more effectively enlarged and studied in the external version of it in our archives folder. The reason for providing such a broad summary view is to highlight not only the degree of lira weakness, but also sheer upward US dollar technical trend acceleration against it is now extreme. While the greenback is also strengthening against other developed currencies and especially emerging currencies on stronger US economic growth, they are nowhere as weak as the Turkish lira.
The opening monthly chart is also to establish that even on an historic view the up trendline across the SEP 2016 and SEP 2017 lows is the proper slope to then project the higher (blue dash) channel return line from the 3.9410 JAN 2017 high. This is because the lower, more gradual late-2014 through mid-2016 up trend’s (blue dash) channel return line had already been accelerated above in the low 3.60 area on the surge into 2017. This is important to confidently assess the situation on the USD/TRY weekly chart below.
And it is important to note that the reasons for the lira weakness are multifold, which is always the case for any market that experiences extensive sustained weakness.
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