USD/TRY: Upside appears limited around 23.7000

USD/TRY trades within a tight range near 23.60 on Wednesday, adding to the inconclusive price action seen in the previous session.

USD/TRY: Solid resistance emerges around 23.7000

The needle-like rally in USD/TRY seems to have met quite a decent barrier around 23.7000 so far.

Indeed, some respite for the beleaguered lira seems to have emerged after President Erdogan said he “accepted” the views from the freshly appointed economic team, after finmin M. Simsek suggested he will take swift steps in coordination with the central bank.

However, Erdogan later stressed that his particular views on monetary policy, especially regarding interest rates, have not changed, opening the door to further uncertainty ahead of the next monetary policy meeting by the Turkish central bank (CBRT) on June 22.    

Indeed, it remains currently unclear whether Governor Erkan will be effective in implementing her monetary policies while working under the leadership of Erdogan. The first challenge is expected to occur later in the month during the CBRT gathering. There is a significant difference in opinions among investors regarding the appropriate course of action, with suggestions ranging from minor interest rate increases to a potentially drastic strategy involving a substantial rate hike.

What to look for around TRY

USD/TRY’s rally appears to have entered and impasse, as market participants gear up for the next CBRT event due later in the month.

In the meantime, investors are expected to closely monitor upcoming decisions on monetary policy, particularly after President R. T. Erdogan named former economy chief M. Simsek as the new finance minister following the cabinet reshuffle in the wake of the May 28 second round of general elections.

The appointment of Simsek has been welcomed with optimism by market members in spite of the fact that it is not yet clear whether his orthodox stance on monetary policy can survive within Erdogan’s inclination to battle inflation via lower interest rates.

In a more macro scenario, price action around the Turkish lira is supposed to continue to spin around the performance of energy and commodity prices - which are directly correlated to developments from the war in Ukraine, broad risk appetite trends, and dollar dynamics.

Key events in Türkiye this week: Budget Balance (Thursday) – End Year CPI Forecast (Friday).

Eminent issues on the back boiler: Persistent skepticism over the CBRT credibility/independence. Absence of structural reforms. Bouts of geopolitical concerns.

USD/TRY key levels

So far, the pair is gaining 0.01% at 23.5840 and faces the next hurdle at 23.6804 (all-time high June 12) followed by 24.00 (round level). On the downside, a break below 20.0526 (55-day SMA) would expose 19.5261 (100-day SMA) and finally 19.0465 (200-day SMA).