Thursday, May 6, 2010
USDTRY is in an obscure situation locked into a 1.44-1.55 range for over a year now and despite the dollar strength could not break out yet. turkey had in the last weeks extraordinary inflows as the government claimed that some businessman repatriated around 50 bil. which is very obscure. turkey has now even offically negative interest rates with inflation over 10 percent although the real one is rather south of 20 percent the interest you can collect around 9 percent. since turkey shows officially a relativ low debt to GDP ratio of 47 percent which is one of the best in Europe. Partly it is done with the most Mainstreet growth hostile policy of driving hard bargains against the citizens with the most expensive gasoline prices currently at 2.60 Dollar per liter just to give one sample. Or double collecting consumption taxes as you have to pay VAT and a special tax called OIV for example on your phone bills bringing the tax above 30 percent. The government is walking along the edge as they take away a lot of buying power from regular Mainstreet as they let get the rich people away with almost paying nothing close to the Greece situation. At the same time sharp rising cost of living has a big impact on future consumption and will bring the TRY into big trouble in the near term future as this is not a sustainable status quo and elections are less than a year away. A break above the 1.55 resistance is only a matter of time but will be majorly influenced by the EURUSD situation which should find a bottom in the 1.25 area as we have reached already the 1.27 target and have to make around 4-5 lower closes in the next days. We are now in panic mode which usually marks the end of trends.