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USD/TRY slides after giant rate hike

XAU/USD – 4hr Candlesticks
Source: GKFX / MT4 (November 19, 2020)

Gold is consolidating after its large $100 daily drop in what could be a bear flag pattern whereby the objective would be an extension of the original decline from the breakout area, which would take the price down to $1750 per oz.
 

TAKEAWAYS


•    The Turkish lira gained over 2% after the CBRT raised rates to 15%
•    Oxford / AstraZeneca covid vaccine found to be safe, produces immune response
•    Mitch McConnell agrees to resume US stimulus talks
•    Dollar reverses early gains to turn lower
•    Ethereum makes 2-year high
•    DAY AHEAD: Australia retail sales, China rate decision, UK retail sales
 

GURU WISDOM


“We learn from experience that men never learn anything from experience.”– George Bernard Shaw
 

MARKETS


Stocks on Wall Street rose on Thursday but it was tech stocks rather than real-world value stocks that led the charge as investors bought the dip but remained fearful of rising virus cases. On Thursday the CDC (centre for disease control) suggested Americans do not travel for Thanksgiving, a big traditional family holiday. There was also some optimism to be had from good stage 2 trial news from AstraZeneca about its COVID vaccine.

The US dollar reversed early gains after US jobless claims data disappointed and as overall market sentiment improved, reducing the need for a haven.

Gold fell over 1% to re-test major support at $1850 per oz. An imminent breakout in Bitcoin relative to gold has captured some attention this week. 

Bitcoin erased early losses to push back over $18,000 late Thursday while Ethereum peeked above June highs to form a fresh 2-year high.

After a positive few days, the price of oil dropped on Thursday amid a worsening demand outlook because of new restrictions in some states. Oil could stay in a holding pattern until a view is taken on the OPEC meeting on November 30.
 

TRY new era


The CBRT (Central Bank of the Republic of Turkey) lifted interest rates as expected from 10.25% to 15% in a huge one-time adjustment to monetary policy. The Turkish lira gained over 2% against the dollar and euro. USD/TRY is at 7.52 after crashing through 8.00 for the first time ever last month. The currency has fallen a long way since 2013 when the exchange rate was under 2.0 and could be about to stage a long recovery.

The lira strength came off the back of its biggest weekly gain since 2008 when Turkish President Recep Tayyip Erdogan pledged to adopt a new economic model centred on lower inflation and international investment. The apparent turnaround in attitude towards the currency devaluation and inflation in Turkey after the installation of new central bank governor Naci Agbal has seen investors flock back into Turkish assets.
 

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