USD/TRY finds buyers at 21-DMA as lira remains vulnerable amid soaring inflation

USD/TRY is almost unchanged on the day, hovering around 13.50, as bulls take a breather after Tuesday’s turnaround from 13.00.

Having failed to find acceptance above the 14.00 level on a couple of occasions, the currency pair has entered a phase of consolidation, as bulls bide time before the next push higher.

The odds for the further upside remain higher, as the Turkish lira continues to look weak amid soaring inflation and instability in the country’s economic policies. Turkey’s President Recep Tayyip Erdogan’s promises to stabilize the economy fail to excite TRY buyers.

The main headwind for the economy and beleaguered currency remains the relentless rise in inflation, which offsets any optimism from a new rescue plan announced last month to bolster the lira. 

Inflation in the country hit a 19-year high of 36.1% for December, with Goldman Sachs projecting Turkey’s inflation to go above 40% for most of the coming year.

USD/TRY: Technical outlook

Looking at USD/TRY’s technical chart, the pair is trying hard to defend the critical 21-Daily Moving Average (DMA) at 13.29.

Acceptance above the latter on a daily closing basis will fuel a fresh advance towards the 14.00 supply zone.

Further up, the December 21 high of 14.14 will challenge the bearish commitments.

The 14-day Relative Strength Index (RSI) is trading firmer above the midline, suggesting that there is more scope for the recovery.

Meanwhile, a sustained break below the 21-DMA will drag the rates back towards the January 3 low of 12.75, below which the 12.09 cap will come in the way. That level is the bullish 50-DMA support.

USD/TRY: Daily chart