Forex News and Events
It seems there is little scope for meaningful lira recovery. Governor Basci is most probably watching the lira debasing desperately, enable to take the policy step needed to cool-off the TRY-negative tensions. The heavy political pressures would not let him take the most needed rate action, at least not on the lira! This is why, the central bank attempted to act on FX directly by cutting the deposit rates on euro and dollar yesterday (euro from 6.5% to 2.5% and dollar from 7.5% to 4.5%). This might have helped to curb the appetite for euro and dollar holdings in the domestic market at least and to reverse speculative shorts broadly. Yet lira didn’t have time to consolidate any correction. USD/TRY traded below 2.60 before rebounding to 2.6338 in Istanbul following Economy Minister Zeybeci’s comments. Zeybeci said “two more rate cuts should have occurred by now”, “current loan rates are unacceptable” while “Turkey can take some measures to support growth”.
Then in a renewed attempt, the CBT announced “FX liquidity of approximately USD 1.5 billion will be provided to the system via adjustments in the reserve option coefficients” from March 13th. We remind that the alternative measures are short-term solutions as the market is looking for an adequate interest rate adjustment to Turkey’s country risk. Short-term corrections should only give opportunities to strengthen TRY-short positions as the implicit CBT / government conflict concretizes.
As the political figures suspiciously refuse to halt their comment on rates, their lower-rate rhetoric find little buyer on international markets. This persistence revives talks that the verbal intervention might be, indeed, wanted to debase the lira, and perhaps not only to boost the exports. Some speculate on personal interest behind the move, while we remain cautious on such street talks.
The CBT’s failed attempts to curb pressures on TRY by alternative measures ring the alarm bell as the reluctance to act on interest rates should continue keeping the downside pressures tight before next week’s Fed meeting. The lira is at the edge of the vicious circle of higher volatility-lower lira-higher volatility, a setting favorable to speed up the bearish momentum on lira and lead to a surprise central bank intervention. Should the TRY-negative pressures build stronger, the CBT would have no choice but to proceed with aggressive correction on interest rates to get in line with the risk-to-reward compensation the market is asking for.
XAU/USD falls to 3-month low, platinum at 5-year lows
As USD extend gains, the slide in dollar gold prices accelerate. XAU/USD legs down to $1,155.30 at the time of writing, the bearish momentum strengthens with next target eyed at November low of $1,132.16. There is nothing surprising in down-trending gold as hawkish Fed speculations drive the global FX prices and the expectations for a sooner FF rate hike would not only mean that gold will cost more expensive in terms of USD, but also that the optimism on US economy should lead to reallocation of funds to broader plat of risk assets (suggesting gradual ease in focus for gold from households, individual portfolios). The SPDR has lost more than $3 since Friday’s strong US labor data, its gold holdings decreased to 753 metric tons as of March 9th.
XAU/USD falls to 3-month low
The Risk Today
Peter Rosenstreich
EUR/USD EUR/USD has broken the support at 1.1098, is now challenging the strong support at 1.0765/75. Hourly resistances for a short-term bounce can be found at 1.0856 (intraday high) and 1.1033 (06/03/2015 high). In the longer term, the symmetrical triangle favours further weakness towards parity. As a result, any strength is likely to be temporary in nature. Key resistances stand at 1.1534 (03/02/2015 high) and 1.1679 (21/01/2015 high). Key supports can be found at 1.0765 (03/09/2003 low).
GBP/USD GBP/USD is consolidating near the support implied by recent lows at 1.5027. The short-term technical structure is negative as long as prices remain below the hourly resistance at 1.5317 (17/02/2015 low) and 1.5398 (03/03/2015 high). A key support stands at 1.4952. In the longer term, the recent rise is seen as an oversold rebound, whose upside potential should be capped by the key resistances at 1.5620 (31/12/2014 high) and 1.5826 (27/11/2014 high). A strong support stands at 1.4814.
USD/JPY USD/JPY has rallied of bullish trend line and is now challenging the key resistance at 121.85. A support can be found at 120.66 (see also the rising channel top). Another support lies at 118.18. A long-term bullish bias is favoured as long as the key support at 110.09 (01/10/2014 high) holds. Even if a medium-term consolidation is likely underway, there is no sign to suggest the end of the long-term bullish trend yet. A gradual rise towards the major resistance at 124.14 (22/06/2007 high) is therefore favoured. A key support can be found at 115.57.
USD/CHF USD/CHF bullish momentum has recovered rose significantly higher yesterday, indicating persistent buying interest. Monitor the resistance at 0.9972. Hourly supports can now be found at 0.9854 (intraday low) and 0.9831 (09/03/2015 low). In the longer-term, the bullish momentum in USD/CHF has resumed after the removal of the EUR/CHF floor. The break of the key resistance at 0.9554 (16/12/2014 low) opens the way for a further rise towards the other key resistance at 0.9972 (20/07/2012 high). A key support can now be found at 0.9374 (20/02/2015 low, see also the 200-day moving average). (16/12/2014 low).
