Summary:
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Turkish Lira plunges 20%
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Currency sinks as Trump ramps up sanctions
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Impact felt elsewhere, with stocks lower and Gold bid
The swoon lower in the Turkish Lira this morning has served of a harbinger of what was to come with the quick 12% decline around 7AM dwarfed by a larger drop this afternoon. The latest flush has come after US president Trump took to twitter to announce the doubling of sanctions against the country as tensions between Washington and Istanbul go from bad to worse.
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The story regarding the fall in the Lira has gone from the biggest of the day, to the biggest of the week in little time and should it continue to fall then it may well end up being one of the stories of 2018. The USDTRY rallied a scarcely believable 23% from the low of the day (LOD) to the new all-time high of 6.86 and it might not be done just yet. An earlier press conference from Turkish president Erdogan failed to stem the declines, with calls for Turks to exchange their foreign currencies for the Lira in an attempt to prop it up, wreaking of desperation.
The USDTRY has surged over 20% from its lowest level of the day with Trump’s tweet providing the catalyst for the most recent push up to a new record peak of 6.86. Source: xStation
Given the scale of the moves we’ve seen in the TRY, it is not surprising that we’re getting clear risk-off flows with the USD and JPY obvious beneficiaries. Stocks have also experienced some selling with the DE30 falling to its lowest level of the week around 12400. As far as the US is concerned, there’s also been declines although its is still holding up fairly well at the time of writing. The US100 in particular could be worth watching into tonight’s close with the market forming another possible inverted hammer after a similar pattern was seen the week before last. All-time highs (ATH) around 7530 remain possible resistance and given the large move higher we’ve seen in the past couple of years, any pullback offers plenty of downside potential. The 23.6% fib at 6827 is a possible target with more ambitious shorts looking to the 38.2% level near 6400.
The US100 could be set to print another possible reversal signal on the weekly. If record highs at 7530 hold once more then fib retracements of the move higher seen over the past 2 years could offer possible targets with the 23.6% fib a 6827. Source: xStation
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