USD/TRY fades recent weakness, hits 13.50 level

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  • The stability around USD/TRY remains surprising.
  • The pair is still cruising in the 1300-1400 range so far.
  • Turkey’s consumer confidence improved to 73.2 in January.

The USD/TRY extends the sideways move at 13.50 at the end of the week.

USD/TRY calm after CBRT decision

USD/TRY regains some bullish traction and leaves behind two consecutive daily pullbacks on Friday, always in the context of the broad-based consolidation mood within the 1300-1400 range that has been in place since the beginning of the new year.

The pair’s consolidation stance appears well set for yet another session after the central bank of Turkey (CBRT) left the one-week repo rate unchanged at 14.00% at its meeting on Thursday, coinciding with the broad consensus.

The last time the CBRT kept a firm hand on rates was at the August 2021 event, which was followed by 500bp rate cuts in September (100bps), October (200bps), November (100bps.) and December (100 bp.) meetings.

In the domestic calendar, Consumer Confidence improved to 73.2 for the current month (from 68.9). The higher reading comes after a marked advance in the “Expectation of the financial situation of households during the next 12 months” and the “Expectation of the general economic situation during the next 12 months”.

What to look for around TRY

The pair holds the consolidative multi-session theme well in place, always within the 13.00-14.00 range. Higher-than-expected inflation figures released earlier in the year put the lira under additional pressure combined with some cracks in confidence among Turks regarding the government’s recently announced plan to promote the de-dollarization of the economy. Meanwhile, the CBRT’s reluctance to change course (collision?) and pervasive political pressure to favor lower interest rates in the current context of runaway inflation and (very) negative real interest rates are forecast to keep the currency country under intense pressure at the moment.

key levels

So far the pair is up 1.01% at 13.4324 and a drop below 12.7523 (3 Jan 2022 low) would pave the way for a test of 12.6793 (55-day SMA) and finally 10.2027 (23rd monthly low). from December). On the other hand, the next upside barrier lines up at 13.9319 (Jan 10, 2022 high), followed by 18.2582 (Jan 20 all-time high) and then 19.0000 (round level).

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