The Turkish lira is bracing for major moves in the next few days as the country goes to a tight election. The USD/TRY exchange rate is trading at an all-time high of 19.56 while the GBP/TRY and EUR/TRY have surged to 24.82 and 21.38, respectively.
Turkish lira waits for the election
The biggest forex news in the coming days will be the Turkish election, which will happen on Sunday. This will be an important election that will determine the future of the turkish lira, which has plunged by more than 350% in the past five years.
As I wrote in this article, the Turkish lira’s collapse has been intentional and was caused by the actions of the CBRT. The central bank, which is not independent, has made numerous decisions in the past few years.
For example, the CBRT has slashed interest rates from the pandemic high of 20% to 8%. Central bank officials who supported a more restrictive policy were laid off.
Therefore, a victory by Erdogan will mean that the central bank will continue lacking the independence, which will push the lira much lower.
On the other hand, Kemal Kılıçdaroğlu has pledged to ensure the bank’s independence, which will push the USD/TRY price sharply lower. A lira comeback will help to lower inflation, which stands at about 48%.
Most analysts believe that it will be difficult for the opposition to beat Erdgan, who has been in power for years. However, a recent poll showed that Kemal Kılıçdaroğlu was polling at 49.3% compared to Erdogan’s 43.7%. If these polls are accurate, then it means that the two men will go to a run-off later this month.
As shown above, the USD/TRY price is sitting at its all-time high. The pair is supported by the 25-day moving average while the MACD has formed a bearish divergence pattern. Further, the Relative Strength Index (RSI) is at the overbought level on the weekly chart.
Therefore, at this stage, technical analysis may not provide the best signals for the Turkish lira. Also, because of the unreliability of Turkish pollsters, it is hard to predict who will win the election. If Erdogan wins, the USDTRY price will surge above 20. On the other hand, if the opposition wins, the Turkish lira could surge to 10, where it was in December 2021.
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