USD/TRY's dramatic intervened drop is stablising around 12.0000

• USD/TRY is stabilizing following a volatile week.
• Bulls are moving in vs a strong sell-off from the highest levels since the 1980s.

USD/TRY is stabilising following three consecutive days of falling prices that have wiped out the November rally. At the time of writing, USD/TRY is trading at 12.0354 and in between an 11.9655 and 12.0828 range so far. 

President Recep Tayyip Erdoğan ordered the Turkish central bank to start reducing interest rates earlier in the year which led to the currency falling around 50% since September. Inflation rose 21.31% in November compared to the same period last year. On a monthly basis inflation rose 3.51% compared to October.  The president insisted on four interest rate cuts over the four months despite surging inflation and the market responded in kind.

However, on Monday 20 December the TRY weakened significantly when President Erdoğan said in a televised speech that he will continue cutting interest rates after rates were cut by 100 basis points. This took the rate to -6%, the lowest in the world and the to the weakest level since the1 980s. However, there was a dramatic comeback in the currency when the government announced a series of measures to support the currency on Monday.

Amongst other measures, including direct FX forward contracts from the central bank for companies heading overseas business, Erdoğan explained that the government will protect lira deposits by making up for the losses incurred. TRY has rallied, and the plan is working, so far. However, if the president is intent on cutting rates in an inflationary environment, then the lira will be left vulnerable to further weakness. 

USD/TRY technical analysis

Technicals are futile under such fundamental drivers and wild price action as this, but nevertheless, if there is to be stability, then the range between structures can be outlined as above.