• USD/TRY remains side-lined in the mid-13.00s so far.
  • The upside stays capped by the 2022 high near 14.00.
  • The FOMC meets and is seen delivering a hawkish message.

Price action around USD/TRY became dull since the start of the year, keeping the trade within the 13.00 and 14.00 levels so far.

USD/TRY vigilant on FOMC, geopolitics

The consolidative phase around USD/TRY seems to have been reinforced after the Turkish central bank (CBRT) left the One-Week Repo Rate unchanged at 14.00% at its January meeting.

Moving forward, investors are now expected to closely follow the geopolitical developments coming from the Russia-Ukraine front and its implications on crude oil, as Turkey is a major energy importer.

In the domestic camp, and seconding inflation jitters, market participants stay wary of the advance (or absence of it) of the FX-protected lira deposits announced by the Erdogan government in late December to tackle the incipient currency crisis.

Later in the NA session, the FOMC is seen keeping the Fed Funds Target Range unchanged, although consensus among investors keep pointing to a hawkish message from the Committee, which carries the potential to put the EM FX space under extra pressure ultimately.

What to look for around TRY

The pair keeps the multi-session consolidative theme well in place, always within the 13.00-14.00 range. The range bound stance appears reinforced by the recent steady hand by the Turkish central bank, while skepticism keeps running high over the effectiveness of the recently announced plan to promote the de-dollarization of the economy. In the meantime, the reluctance of the CBRT to change the (collision?) course and the omnipresent political pressure to favour lower interest rates in the current context of rampant inflation and (very) negative real interest rates are forecast to keep the domestic currency under pressure for the time being.

Key events in Turkey this week: Economic Confidence Index (Friday).

Eminent issues on the back boiler: 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. Much-needed structural reforms. Growth outlook vs. progress of the coronavirus pandemic. Earlier Presidential/Parliamentary elections?

USD/TRY key levels

So far, the pair is advancing 0.90% at 13.5575 and a drop below 12.7523 (2022 low Jan.3) would expose 10.2027 (monthly low Dec.23) and finally 9.8304 (200-day SMA). On the other hand, the next up barrier lines up at 13.9319 (2022 high Jan.10) followed by 18.2582 (all-time high Dec.20) and then 19.0000 (round level).

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