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Abstract:Turkish President Erdogan again criticized higher interest rates, plans alternative debt instruments for investors.
USD/TRY holds onto post-Fed advances, recently paring early Asian losses.
US T-bond yields, DXY cheer Feds hawkish halt with eyes US Q4 Advance GDP, Durable Goods Orders.
USD/TRY picks up bids to $13.60, reversing the early Asian pullback on Thursday, as market players cheer the US Federal Reserves (Fed) hawkish play.
In doing so, the Turkish lira (TRY) currency pair ignores comments from President Recep Tayyip Erdogan who “Urges Turks to borrow after unorthodox rate cuts”, per Reuters.
During an interview with NTV, Turkish President Erdogan signaled further steps to relieve the burden of inflation while promising new alternative debt issuance for investors. The national leader reiterated his dislike for higher interest rates while saying, “High-interest rate environment creates a fragile situation.” Additionally, Erdogan also said, per Reuters, that loans will be used to increase production while also showing confidence in the new economic model that will ensure Turkey will be less impacted by speculative moves.
On the other hand, the US Federal Reserve (Fed) matched wide market expectations to keep benchmark interest rates and tapering targets intact during Wednesdays Federal Open Market Committee (FOMC) meeting. However, the interesting part from the Monetary Policy Statement was, “The Committee expects it will soon be appropriate to raise the target range for the federal funds rate.”
Fed Chairman Jerome Powell also spoke in sync with the hawkish signals from the US central bank while saying, “There‘s plenty of room to raise rates.” Though, his comments like, “The rate-hike path would depend on incoming data and noted that it is ’impossible to predict,” were taken with a pinch of salt.
Amid these plays, US equities and commodities remained on the back foot, except for oil, whereas the US 10-year Treasury yields rose the most in three weeks, up eight basis points (bps) to 1.87% by the end of Wednesdays North American session. That said, the US T-bond yields stay firmer around 1.85% while the S&P 500 Futures drop 0.65% by the press time.
Looking forward, comments from Turkey and geopolitical tension surrounding Russia and China may entertain USD/TRY traders. However, major attention will be given to the first readings of the US Q4 GDP and Durable Goods Orders for December.
Technical analysis
Unless successfully crossing a five-week-old descending trend line, around $13.70 at the latest, USD/TRY remains lackluster. That said, the 21-DMA level of $13.51 and the mid-January lows near $13.15 could challenge the pair bears.
Disclaimer:
The views in this article only represent the author's personal views, and do not constitute investment advice on this platform. This platform does not guarantee the accuracy, completeness and timeliness of the information in the article, and will not be liable for any loss caused by the use of or reliance on the information in the article.
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Wednesday's major data releases and macroeconomic events are expected to cause volatility to increase after another day of erratic trading in the financial markets. The Spring Budget for the UK will be released, and January Retail Sales figures for January will be made available by Eurostat. ADP Employment Change for February and January JOLTS Job Openings will be discussed later in the session on the US economic docket.
Major currency pairings are still trading in familiar ranges early on Tuesday after the erratic trading on Monday. The US economic docket for the American session will include the factory orders data for January and the ISM Services PMI survey for February. Final updates to the February PMI for the US, Germany, the UK, and the EU will also be released by S&P.