USD / TRY declines from highs near 7.6200

  • USD / TRY reverses the recent drop and tests 7.6200.
  • Turkish retail sales expanded 0.3% in January.
  • US flash consumer sentiment is next on the agenda.

The recovery of the Turkish lira faces some headwinds on Friday as renewed buying interest in the dollar soared to the USD/TRY 2-day highs near 7.6200.

USD / TRY rises thanks to the strength of the USD

USD / TRY is trading strong gains and reversing three consecutive daily pullbacks amid the resumption of sentiment towards the dollar.

Indeed, the robust rally in US yields gives the dollar additional wings and prompts investors to accelerate exits from the risk space. The narrative supporting a strong performance of the US economy amid the steady pace of the vaccine launch continues to prop up the dollar despite President Biden signing the $ 1.9 trillion aid package on Thursday.

On the Turkish agenda, retail sales expanded 0.3% month-on-month during January and 2.0% over the previous year. The additional data saw industrial production expanding at an annualized 11.4% during the same period.

In the US, producer prices increased 0.5% month-on-month and 2.8% year-on-year. Core prices were up 0.2% month-on-month and 2.5% year-on-year.

What to look for around TRY

The lira reverses three sessions in a row with gains amid greater USD strength. Improving sentiment in the dollar has been undermining the lira’s momentum since late February, which was sustained by the CBRT’s commitment to combat high inflation through an orthodox approach to monetary conditions. Furthermore, the central bank appears to have regained some lost credibility / independence over the past few months and this is no small problem considering President Erdogan’s well-known opinion when it comes to higher interest rates. The lira will closely follow this issue in 2021 alongside the Biden Administration’s stance on Turkey, the post-pandemic recovery and occasional bouts of geopolitical effervescence.

Key levels

At the moment, the pair is up 1.47% to 7.5796 and faces the next hurdle at 7.7772 (March 9, 2021 high) followed by 8.0250 (December 7, 2020 monthly high) and finally 8.0423 (December 24, high). November 2020). On the downside, a drop below 7.4079 (200-day SMA) would target 7.2197 (March 1 monthly low) and then 6.8923 (February 16, 2021 low).

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