Summary:

• Turkish Lira not far from record lows 
• EURTRY set for highest ever weekly close
• Erdogan stands by unorthodox monetary policy views

It’s been another week of declines for the Turkish Lira, with the currency falling to its lowest ever level against the Euro on Tuesday. Barring a dramatic reversal before tonight’s close the EURTRY pair is set for its highest ever weekly close with the 15 year uptrend showing little sign of abating. 

 The EURTRY has been in a clear uptrend now since 2003, making an all-time high this week. Source: xStation

The reason for the latest depreciation seen in the Lira is an unorthodox viewpoint of Turkish president Recep Tayyip Erdogan. A recent signalling of an end to the uneasy truce made with the new central bank chief with the president believing that high interest rates cause high inflation. This view is against the vast majority of academics and professionals and has seen a run on the Lira as traders are betting that he may look to cut rates in the not too distant future. 

Incredibly Erdogan has said “we will solve this” and vowed to step up his fight against what he calls the “interest rate lobby” that he says are conspiring to keep Turkey’s interest rates artificially high. His rant also went further in rejecting the idea of central bank independence means he shouldn’t comment on interest rate policy stating that “we can’t make this taboo.” 

 There has been a notable RSI divergence in the past month as the surge higher in price has coincided with a fall in RSI. Source: xStation

After gapping higher over the weekend of the 6/7th October the market has been on a tear higher gaining almost 10% to this week’s all-time high. There has been some notable RSI divergence with this rally as the RSI has made a series of lower highs whilst price has been surging higher. This could be seen to suggest that the move is seeing its momentum wane and if price can remain below the recent high of 4.6132 then a pullback may be in the offing.