Lira's Corrective Slide Lower Set To Resume As Death-Cross Nears

• The USD/TRY is trading is trading up 0.3% at 5.3360, the strongest level since in the last three weeks.
• Technically, the USD/TRY is trading in a sideways corrective trend after a sharp depreciation to 7.1375 in August last year with a 100-day and 200-day moving averages nearing to form a death-cross indicating major technical reversal lower.
• The currency pair was supported by the warning of S&P earlier this week that projected Lira to steadily depreciate.

The USD/TRY is trading some 0.3%on the upside at around 5.3360, the highest level in February as the Turkish government is expected to boost its investment program while the economic fundamentals deteriorate. 

According to the presidential decree, the public investments will reach some 65.4 billion TRY in 2019 (about $12.3 billion) centered on the transport and communication sectors.

The general trend of the US Dollar appreciation in February corresponds with deteriorating economic fundamentals and worsening Credit rating outlook. Investors are selling Turkish bonds and equities and liquidate their Turkish Lira positions.

According to central bank statistics from this Thursday, non-resident investors sold $63 million worth of Turkish equities in the week ending February 15. 

Moreover, the credit rating agency S&P said earlier this week that Turkey’s lira will fall steadily for the next three years as the level of bad bank loans is set to double to 8% in the next 12 months.

“We see the currency steadily depreciating all the way to 2022” S&P sovereign analyst, Maxim Rybnikov, said during a webcast question and answer session on February 19.

Technically the USD/TRY is in a corrective upmove from 5.16 at the beginning of February to 5.34 on Friday. The USD/TRY is moving within a corrective uptrend higher supported by a 50-day moving average (DMA) of 5.3100 on the downside.

The technical oscillators on USD/TRY daily chart are elevated with the Slow Stochastics moving deeply in the Overbought territory and the long-term averages including 100-DMA and 200-DMA are about to form a death-cross indicating further declines.

USD/TRY daily chart