USD/TRY appears volatile, bulls still can’t break 16.00

• USD/TRY trades on the defensive below the 16.00 mark.
• Turkey Capacity Utilization improved to 78.0% in May.
• Turkey End Year CPI Forecast now seen at 57.92%.

USD/TRY trades in quite a volatile fashion always below the 16.00 mark at the beginning of the week.

USD/TRY shifts its focus to the CBRT

USD/TRY extends the choppy activity seen as of late, while further upside and a break above the key 16.00 barrier still remaining elusive for bulls.

The lira managed to regain traction and drag spot lower on the back of the generalized selling bias in the greenback and the consequent renewed inflows into the risk complex and the EM FX space.

In the domestic calendar, Turkey’s Capacity Utilization rose to 78.0% in May, while the

End Year CPI Forecast is now expected at 57.92% (from 46.44%). Additional data saw the Manufacturing Confidence down a little to 109.4 (from 109.7) in May.

In the meantime, the pair is expected to continue within the current consolidative theme ahead of the CBRT event on Thursday, where market consensus still expects the central bank to keep rates unchanged despite the rampant inflation.

What to look for around TRY

USD/TRY keeps the upside bias well and sound and trades at shouting distance from the 16.00 mark.

So far, price action in the Turkish currency is expected to gyrate around the performance of energy prices, the broad risk appetite trends, the Fed’s rate path and the developments from the war in Ukraine.

Extra risks facing TRY also come from the domestic backyard, as inflation gives no signs of abating, real interest rates remain entrenched in negative figures and the political pressure to keep the CBRT biased towards low interest rates remain omnipresent.

Key events in Turkey this week: Capacity Utilization, End Year CPI, Manufacturing Confidence (Monday) – Economic Confidence Index, CBRT Interest Rate Decision (Thursday).

Eminent issues on the back boiler: FX intervention by the CBRT. Progress (or lack of it) of the government’s new scheme oriented to support the lira via protected time deposits. Constant government pressure on the CBRT vs. bank’s credibility/independence. Bouts of geopolitical concerns. Structural reforms. Upcoming Presidential/Parliamentary elections.

USD/TRY key levels

So far, the pair is losing 0.13% at 15.8395 and a drop below 14.6836 (monthly low May 4) would expose 14.5458 (monthly low April 12) and finally 14.5136 (weekly low March 29). On the upside, the next barrier aligns at 15.9815 (2022 high May 20) seconded by 18.2582 (all-time high December 20) and then 19.00 (round level).