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USD/TRY treads water around 8.1500

  • USD/TRY creeps higher, always above the 8.000 mark.
  • Some decent support emerged around 8.0000 so far.
  • Investors remain highly cautious ahead of the CBRT event.

The Turkish lira trades with small losses and prompts USD/TRY to keep the tight trading range around the 8.1500 zone on Thursday.

USD/TRY focused on CBRT

USD/TRY advances for the third consecutive session so far on Thursday, extending the bounce of last Friday’s pullback to the 8.0000 neighbourhood, which now stands as quite a strong contention area.

In the meantime, cautiousness among market participants is expected to pick up pace in the upcoming days ahead of the meeting by the Turkish central bank on April 15.

There is no firm consensus regarding the potential announcements by the CBRT, although bank’s officials reiterated that an interest rate cut is not guaranteed. Despite these comments, investors remain highly vigilant over the potential shift to unorthodox policy measures, which remains the most likely scenario eventually.

Nothing scheduled in the domestic docket, while US Initial Claims rose by 744K from a week earlier, disappointing expectations.

What to look for around TRY

The near-term outlook for the lira remains fragile to say the least. Despite hinting at the opposite, the new CBRT Governor S.Kavcioglu is gradually expected to reverse (wipe out) the shift to a market friendly approach of the monetary policy that was successfully implemented by former Governor N.Agbal back in November 2020. President Erdogan’s appointment of Kavcioglu demonstrated once again whose hand is rocking the monetary cradle in Turkey and will most likely be the prelude of the return to unorthodox/looser measures of monetary policy in combination with rapidly rising bets of a balance of payments crisis and a drain of FX reserves. Against this backdrop, it will surprise nobody to see spot trading around 10.00 in the months to come.

Key events in Turkey this week: End Year CPI Forecast (Friday).

Eminent issues on the back boiler: Potential US/EU sanctions against Ankara. Government pressure on the CBRT vs. bank’s credibility/independence. Bouts of geopolitical concerns. Much-needed structural reforms. Growth outlook vs. progress of the coronavirus pandemic.

USD/TRY key levels

At the moment the pair is advancing 0.22% at 8.1540 and faces the next up barrier at 8.4526 (2021 high Mar.30) seconded by 8.5777 (all-time high Nov.6 2020) and finally 9.0000 (round level). On the other hand, a drop below 7.7772 (high Mar.9) would aim for 7.5103 (200-day SMA) and then 7.1856 (monthly low Mar.19).

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