USD/TRY gets ready to assault 18.00… again

The Turkish lira depreciates for the second session in a row and encourages USD/TRY to flirts once again with the key 1800 hurdle on Tuesday.

USD/TRY remains focused on 18.00

USD/TRY records gains for the second consecutive session on Tuesday, extending the auspicious start of the week at the same time.

The move higher in the pair comes in contrast with the prevailing selling pressure in the greenback and the generalized upbeat mood in the risk complex ahead of the release of key US inflation figures on Wednesday.

The lira, in the meantime, sheds further ground following gains recorded in the second half of last week, particularly in response to Friday’s news that the country’s FX reserves increased to 2-month highs around $9.12 billion in the week to July 29.

In the domestic calendar, the focus of attention remains on the publication of the jobless rate and the End Year CPI Forecast on Wednesday and Friday, respectively.

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 and commodity prices - which are 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 (despite rising less than forecast in July), real interest rates remain entrenched in negative figures and the political pressure to keep the CBRT biased towards low interest rates remains 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: Unemployment Rate (Wednesday) – Current Account (Thursday) – End year CPI Forecast, Industrial Production, Retail Sales (Friday).

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 0.16% at 17.9302 and faces the immediate target at 17.9874 (2022 high August 3) 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 16.1867 (100-day SMA) and finally 16.0365 (monthly low June 27).