USD/TRY forecast to rise further despite hitting record highs

Erdogan dares West to implement sanctions

Relations between the West and Turkey have taken a step back over the weekend, with Erdogan stating that French President Emmanuel Macron needed a ‘mental check’ after vowing to protect Frances secularism against radical Islam.

Coming off the back of the shocking murder of a teacher who had shown controversial cartoons to his students, Erdogan has stoked relations between the two states by accusing Macron of targeting Islamic religion.

Unfortunately, the breakdown between France and Turkey has also expanded further, with the US warning of a credible threat of terrorism to its Istanbul embassy. With the US criticising Turkey for its role in purchasing the Russian-made S-400 air defense system, and supplying Azerbaijani forces in their battle with Armenia, Erdogan has dared US President Donald Trump to impose sanctions.

With Goldman Sachs estimating that Turkey has spent around $134 billion in just 18 months to support the lira, Moody’s has warned that the country had ‘almost depleted the buffers that would allow it stave off a potential balance-of-payments crisis’.

With Turkish relations with the West souring, and rising anxiety over the ability to support the lira, it comes as no surprise to see the bullish USD/TRY outlook remain in play.

USD/TRY forecast: uptrend likely to continue

USD/TRY has been trending higher for over a decade now, with the pair up over 460% over that 10 year period. While that may not be ideal for holders of Turkish assets, it does provide a remarkably consistent market for traders to be able to utilise. The latest rally through the 8 threshold comes off the back of a three-month period which has seen the pair rise 18%.

The four-hour chart highlights the latest breakdown towards the 61.8% Fibonacci support level, with the subsequent rally providing yet another high and eventual push through the 8 mark.

This uptrend looks highlight likely to continue given the wider decade-long bull market, with any short-term pullback likely to bring about a buying opportunity. As such, the bullish outlook holds unless we see a break back below the recent ₺7.7794 swing low.