USD/TRY forms an ascending triangle after the CBRT rate decision
- The USD/TRY pair has formed an ascending triangle pattern after the CBRT rate decision.
- The bank left interest rates unchanged as most analysts were expecting.
- Focus shifts to the United States where the government will publish NFP data.
The USD/TRY price wavered after the second Turkish Central Bank decision by Sahap Kavcioglu. The pair is trading at 8.3133, where it has been in the past few days.
CBRT interest rate decision
Sahap Kavcıoğlu concluded his second monetary policy meeting after his surprise appointment in March this year. As widely expected, he decided to leave interest rates unchanged for the second consecutive month.
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The main one-week repo rate remained at 19% while the overnight lending and borrowing rate remained at 20.50% and 17.50%, respectively. This decision was in line with what analysts polled by Bloomberg and Reuters were expecting.
The decision came a few days after the country’s statistics agency published a relatively modest inflation increase in April. The prices rose for the seventh straight month because of the ongoing shipping issues, weaker lira, and higher oil prices. Therefore, by leaving rates unchanged, the bank is betting that inflation has peaked and that it will start going down. The bank said:
“The policy rate will continue to be determined at a level above inflation to maintain a strong disinflationary effect until strong indicators point to a permanent fall in inflation and the medium-term 5 percent target is reached.”
As such, many analysts believe that the CBRT will slash interest rates in the third quarter of this year. Furthermore, in his past writings, the governor argued that lower rates were necessary to support the economy.
He also made the case that higher rates tend to lead to inflation, a view that is not supported by many economists. In fact, the Brazilian Central Bank hiked interest rates earlier today and signaled that it would hike in June to curb inflation.
Meanwhile, the upcoming US non-farm payroll (NFP) will have an impact on the USD/TRY pair. On Wednesday, data by ADP showed that the economy added more than 700k jobs. And the median estimate by analysts polled by Reuters is that the economy added more than 800k jobs. If this is the case, the Fed could be under intense pressure to hike, which will be bullish for the USD/TRY.
USD/TRY technical forecast
The four-hour chart shows that the USD/TRY pair is in a consolidation mode. As such, it is hovering at the 25-day and 15-day weighted moving averages. The pair has also formed what looks like an ascending triangle. In our free forex trading course, such a triangle is usually a bullish sign. The Average True Range (ATR), which is a measure of volatility has also dropped.
Therefore, there is a possibility that the pair will soon have a major bullish breakout. For this to happen, it will need to move above the resistance at 8.4567.