When is the Turkish referendum and how could affect the TRY?

Turkish citizens will vote on a constitutional referendum on April 16, which aims to replace Turkey's parliamentary system with an executive presidency. The official outcome of the voting is expected to be finalized on Monday during the early European morning hours. 

Key notes

A "Yes" outcome will put a package of 18 amendments to the constitution into effect, which would make the president the head of the executive branch while diminishing the authority of the prime minister. The changes would also grant the president with the authority to appoint judges of the constitutional court and call general elections.

"The Venice Commission – the custodian of constitutional probity across Europe – warned in its 10 March report that the proposed changes posed a “danger of degenerating into an authoritarian rule,” said Standard Chartered analysts in a recent report. 

On the other hand, a "No" outcome is likely to create political jitters in the country. "If it's a No vote, it will shake and undermine the prestige and dent the aura of invincibility that has so far defined his tenure in politics Fadi Hakura, an associated fellow and manager of the Turkey Project at Chatham House, told CNBC.

Latest poll results fail to provide any clarity on a possible result. According to Reuters, polling company Konda said the number of "yes" voters stood at 51.5 percent, but said its survey had a margin of error of plus or minus 2.4 percent.

Implications for TRY

Regardless of the outcome, the TRY is poised to weaken further in the near-term. A "No" vote would bring political uncertainty and push the investors away. President Recep Tayyip Erdoğan suggested that if they fail to get a "Yes" vote, they would simply go for an another referendum at a later date. On the other hand, a "Yes" vote would raise concerns over how Erdoğan would use his power. The ruling party, AKP, has been arguing that only a "Yes" vote would allow them to make more economic reforms, which could help the country grow. Speaking to Daily Sabah, President of Investment Support and Promotion Agency of Turkey (ISPAT) Arda Ermut highlighted that Turkey's referendum on the constitutional change will be a milestone for the facilitation of more reforms that will earn momentum to Turkey's investment.

The most likely scenario is that the traders won't be anxious to take any TRY positions anytime soon as they need time to assess the outcome of the referendum.

The USD/TRY has been moving in a broad range between 3.75 and 3.58 since early March. If a TRY sell-off is triggered after Sunday, the pair could rise towards 3.80 (Fibo 23.6% retracement of Dec/Jan rise). Above that level, 3.94 (record high) is a key resistance and only a decisive break through that level could open the door towards 4.0000. 3.56 handle (Fibo  61.8% retracement of Dec/Jan rise) is seen as a strong support that could handle the downward spikes. 3.50 (psychological level) aligns as the next important support.

About Recep Tayyip Erdoğan

With roots in Rize, Recep Tayyip Erdoğan was born in Istanbul on February 26, 1954. He graduated from Kasımpaşa Piyale Primary School in 1965 and completed his high school education at Istanbul Imam Hatip School (Religious Vocational High School) in 1973. Having succeeded in the necessary examinations for additional courses, Mr. Erdoğan received a diploma from Eyüp High School as well. He received his graduation diploma from Marmara University’s Faculty of Economics and Administrative Sciences in 1981.