USD/TRY looks firm and makes new highs around 18.4500

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  • USD/TRY adds to Friday’s advance and hits new all-time highs.
  • The dollar remains in good position amid the Fed’s tightening bias.
  • Turkey’s production capacity utilization improved somewhat in the current month.

The Turkish lira, as expected, extended its march south and led the USD/TRY to new all-time highs around 14.85 earlier in the week.

USD/TRY: The next step up is 18.5000

USD/TRY traded higher for the second session in a row on Monday and has seen its uptrend strengthened after another bout of strong dollar demand, which continues to weigh on the risk complex and emerging market currency galaxy.

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In fact, everything has been focused on the dollar since the Federal Reserve hiked rates last week and Powell reinforced the hawkish rhetoric, all in support of a tighter stance by the central bank.

Looking at the data, in Turkey capacity utilization improved to 77.4% in September (from 76.7%) and confidence in manufacturing fell to 99 (from 102.1) in the same period.

What to look for around the TRY

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The USD/TRY pair has picked up pace after another unexpected rate cut by the CBTR, while the dollar’s continued recovery has also helped the pair to post all-time highs on the day.

So far, 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 – broad trends in risk appetite and the path of Fed rates in the coming months.

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

Furthermore, the lira will continue to suffer against the background of Ankara’s plans to prioritize growth (through higher exports and tourism revenues) and improving the current account.

USD/TRY Key Levels

So far the pair is gaining 0.20% at 18.4407 and faces the next hurdle at 18.4583 (26 Sep all-time high), followed by 19.00 (round level). To the downside, a break below 17.9798 (55-day SMA) would expose 17.8590 (weekly low Aug 17) and finally 17.7586 (monthly low).

Source: Fx Street

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