USD/TRY looks vigilant in the area of yearly highs

The Turkish lira extends the bearish note and motivates USD/TRY to trade with modest gains around 17.35 midweek.

USD/TRY looks to Powell, risk trends

USD/TRY appears to have entered a consolidation theme in the last couple of weeks, always above the 17.00 yardstick and at shouting distance from 2022 peaks near 17.40.

In the meantime, the lira is predicted to keep the cautious tone, as the Turkish central bank (CBRT) meets on Thursday. On this, consensus still sees the central bank keeping the steady hand despite the “tightening fashion” in other central banks and the rampant inflation hitting Turkey.

In the calendar, Turkey’s Consumer Confidence deteriorated to 63.4 in June (from 67.6).

Later in the session, Fed’s Powell will testify before the US Senate.

What to look for around TRY

USD/TRY keeps the underlying upside bias well and sound and extends the move above the 17.00 mark, an area last traded back in December 2021.

So far, price action in the Turkish currency is expected to gyrate around the performance of energy prices, the broad risk appetite trends, the Fed’s rate path and the developments from the war in Ukraine.

Extra risks facing TRY 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.

Key events in Turkey this week: Consumer Confidence (Wednesday) - CBRT interest rate decision (Thursday) – Capacity Utilization, Manufacturing Confidence (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. Upcoming Presidential/Parliamentary elections.

USD/TRY key levels

So far, the pair is gaining 0.22% at 17.3501 and faces the next up barrier at 17.3680 (2022 high June 21) seconded by 18.2582 (all-time high December 20) and then 19.00 (round level). On the flip side, a breach of 16.3136 (monthly low June 3) would aim to 16.1431 (low May 27) and finally 15.6684 (low May 23).