Mahfi Eğilmez wrote: The Central Bank’s dollar/TL plan

Mahfi Eğilmez wrote: The Central Bank's dollar/TL plan

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Central Bank currency sales and exchange rate hikes, which have been discussed recently, are high on the agenda.

With the Central Bank holding the interest rate decision constant, an upward movement in the exchange rate is expected, while the USD/TL rate fell below the pivot point of 16.25 and fell back to 16.19 .

NOT ADAPTED TO SUPPLY AND DEMAND

Rigid, “My article in which I explained that the approach based on creating the impression that the support point of the USD/TL rate is broken by selling foreign currencies on the market will not work” In his post, which he defined as 16.19, he said that 16.19 is not suitable for normal supply and demand in the market, and is a forced level created by the currency sales.

Former Undersecretary of the Treasury and Economist Dr. Mahfi Eğilmez, in his personal blog, ‘Support and Resistance Levels in USD/TL Exchange and Efforts to Lower the Exchange Rate’ is as follows:

SUPPORT AND RESISTANCE LEVELS, PIVOT POINT, SUPPORT AND BREAK STRENGTH

There are bearish and bullish points that are followed when prices rise and fall in the financial markets. These are called support and resistance levels. Since our subject is the exchange rate, we will approach it from this angle.

When the rate rises and falls, the highest level reached before the pullback ‘point of resistance’ is accepted as a point of resistance; For a rising exchange rate, this refers to the point at which the rise slows, the willingness to buy decreases, and sellers’ selling demands are higher.

When the market rises, it is also the lowest level it reached before rising again. ‘fulcrum’ is called. The fulcrum is an exchange rate level where the downtrend should end due to increased demand. When the exchange rate falls, the demand increases and the support point is formed.

breaking a point of resistance; This means that the exchange rate closed at least once above the previously determined resistance point. When a point of resistance is broken, that point now becomes a fulcrum.

Breaking of a fulcrum; This means that the rate has closed below this support point at least once. When a support point is broken, this point then becomes a point of resistance.

If the exchange rate closes once and returns to the support or resistance point by breaking the support or resistance point, it is considered that the breakout of the support or resistance has not been fully realized.

pivot point; This is the level that indicates the value of the exchange rate in the balance formed on the previous trading day. By looking at the situation of the trading rate in relation to the central rate, the direction of the movement of the rate can be predicted and the support and resistance points can also be calculated based on this.

Technical analysis of exchange rates; This is an analysis performed by looking at past movements in exchange rates. Changes in value tracked by the exchange rate are reflected on a time series chart, and the points where the exchange rate has peaked and fallen over time are analyzed by looking at past movements on this chart. Accordingly, when the exchange rate crosses these points up or down, one tries to guess where its next stop is.

CAN I REDUCE CURRENCY BY TARGETING SUPPORT AND RESISTANCE LEVELS?

The support, resistance and pivot levels we mentioned above are completely determined by supply and demand in the market. It is not possible for individual supply and demand to affect these levels. However, when a positive or negative development occurs or expectations change, supply or demand moves in the same direction, these levels can be effective.

At the start of the day last Friday morning, the USD/TL rate was at 16.33. Let’s say the standard short term resistance point is 16.35, the pivot point is 16.25 and the support point is 16.15. In other words, if a night passed above 4:35 p.m., it means that the resistance will be broken and the exchange rate will go up.

“AS HE HAS DONE SEVERAL TIMES IN THE PAST…”

At this point, since the Central Bank did not change the interest rate and the measures expected by the market were not taken, the demand for foreign currency continued and the exchange rate was expected to rise. At this point, the public sector stepped in and started selling foreign currency and lowering the rate, as it had done many times in the past, and the USD/TRY rate fell below the pivot point of 16.25 and went down to 16.19, ending the week. The initial support at 16.15 could not be broken, but moving below the pivot point made it look like this support point could be broken.

“A FORCED LEVEL”

Within the framework of the definitions we gave above, we can expect the exchange rate to break the support point of 16.15 on Monday. However, the exchange rate level of 16.19 is not based on normal market supply and demand, but is a level created by the public sector selling foreign currencies, i.e. by coercion. The public sector aims to make people believe that the exchange rate will go down even more by selling foreign currency and in this way to trick people into selling foreign currency. People, on the other hand, do not see any positive developments, expectations or measures that support this situation, so they tend to buy foreign currencies at low prices, seeing the rate cut as an opportunity, not to mention selling currencies. foreign. In the end, the central bank finds itself, as it has done for a long time, eroding its reserves in the name of short-term results.

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