USD/TRY flirts with 2022 highs just below the 18.00 mark

The Turkish lira starts the week on the back foot and motivates USD/TRY to resume the upside and trades at shouting distance from the key 18.00 mark on Monday.

USD/TRY now looks to data

USD/TRY rapidly leaves behind Friday’s doji-like session and resumes the uptrends on Monday, always with the key 18.00 mark as the immediate target for bulls.

The lira remains on the defensive despite the better mood in the risk-associated universe, although market participants appear wary ahead of the publication of inflation figures tracked by the CPI in Türkiye later in the week.

In addition, the radio silence around the Turkish central bank and the lack of details regarding the progress of the protected time deposits scheme contributes further to the prevailing uncertainty and weigh on TRY.

Earlier in the domestic calendar, the Manufacturing PMI receded to 46.90 in July (from 48.10).

What to look for around TRY

The upside bias in USD/TRY remains unchanged and stays on course to revisit the key 18.00 zone.

In the meantime, the lira’s price action is expected to keep gyrating around the performance of energy prices, which appear directly correlated to developments from the war in Ukraine, the broad risk appetite trends and the Fed’s rate path in the next months.

Extra risks facing the Turkish currency also come from the domestic backyard, as inflation gives no signs of abating, real interest rates remain entrenched in negative figures and the political pressure to keep the CBRT biased towards low interest rates remain omnipresent. In addition, there seems to be no Plan B to attract foreign currency in a context where the country’s FX reserves dwindle by the day.

Key events in Türkiye this week: Manufacturing PMI (Monday) – Inflation Rate, Producer Prices (Wednesday).

Eminent issues on the back boiler: FX intervention by the CBRT. Progress (or lack of it) of the government’s new scheme oriented to support the lira via protected time deposits. Constant government pressure on the CBRT vs. bank’s credibility/independence. Bouts of geopolitical concerns. Structural reforms. Presidential/Parliamentary elections in June 23.

USD/TRY key levels

So far, the pair is gaining 0.33% at 17.9427 and faces the immediate target at 17.9519 (2022 high July 29) seconded by 18.2582 (all-time high December 20) and then 19.00 (round level). On the other hand, a breach of 17.1903 (weekly low July 15) would pave the way for 16.9748 (55-day SMA) and finally 16.0365 (monthly low June 27).