USD/TRY is gradually approaching all-time highs around 18.25

• USD/TRY maintains the uptrend near 18.20.
• Türkiye’s economic confidence improved further in August.
• Türkiye’s trade deficit increased to close to TL 11 billion in July.

The Turkish lira remains lower and helps the USD/TRY to advance to the limits of 18.20, or new highs of 2022, on Monday.

USD/TRY continues to target all-time highs

USD/TRY fades Friday’s small drop and starts fourth straight week of gains, trading just shy of all-time highs around 18.25 on Monday (Dec 20, 2021).

The lira continues its march south, as investors continue to maintain a negative view of the currency, especially after the latest decision by the Turkish central bank (CBRT) to reduce the official interest rate, always in a context of persistently high inflation at the global and national levels and the incessant restrictive bias of the world central banks.

On the national calendar, the economic sentiment index improved slightly to 94.30 in August (from 93.40), while the trade deficit widened to 10.69 billion Turkish liras in July.

What to keep in mind around TRY

USD/TRY’s bullish bias remains unchanged and is approaching the all-time high around 18.25. Spot’s bullish trend has intensified following the unexpected CBRT rate cut on August 18.

Meanwhile, price action around the Turkish lira is expected to continue to oscillate around developments in energy and commodity prices – which are directly correlated to developments in the war in Ukraine -, general trends in risk appetite and the trajectory of Fed rates in the coming months.

Additional risks facing the Turkish currency also come from within, as inflation shows no signs of abating (despite rising less than expected in July), real interest rates remain well entrenched in negative and political pressure for the CBRT to go for low interest rates remains pervasive.

In addition, there seems to be no other immediate alternative to attract foreign exchange other than through tourism income, in a context in which the official figures of the country’s foreign exchange reserves continue to be surrounded by growing skepticism among investors.

Technical levels

So far the pair is gaining 0.30% at 18.1835 and faces the immediate target of 18.1973 (2022 high Aug 29) seconded by 18.2582 (all-time high Dec 20) then 19.00 (round level). On the other hand, a break of 17.7586 (monthly low Aug 9) would pave the way to 17.5444 (55-day SMA) and eventually 17.1903 (weekly low Jul 15).