USD/TRY: Bulls now target the 2022 high near 16.50

• USD/TRY resumes the upside beyond 16.40.
• Turkey GDP expanded more than expected in Q1.
• Investors remain cautious ahead of upcoming CPI figures.

The Turkish lira loses ground for the second session in a row and sponsors the move higher in USD/TRY to the area past 16.40 on Tuesday.

USD/TRY up on dollar’s recovery

USD/TRY saw its upside accelerated so far on Tuesday in response to the rebound in the demand for the greenback, which managed to trim part of the recent losses vs. its main peers.

The move higher in the pair is so far accompanied by the recovery in US yields in the belly and the long end of the curve, while the Turkey 10y bond yields keep the range around 23.00%.

Further out, the lira is expected to keep the cautious note ahead of the publication of key inflation figures tracked by the CPI later in the week.

In the domestic calendar, better-than-expected GDP figures showed the economy expanded at an annualized 7.3% in Q1, while Trade Balance results saw the deficit shrink to $6.11B in April.

What to look for around TRY

USD/TRY keeps the underlying upside bias well and sound and looks to consolidate the recent surpass of the 16.00 yardstick for the first time since late December 2021.

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: Q1 GDP, Trade Balance (Tuesday) – Manufacturing PMI (Wednesday) – Inflation Rate, Producer Prices (Friday).

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 gaining 0.03% at 16.3812 and faces the next up barrier at 16.4554 (2022 high May 26) seconded by 18.2582 (all-time high December 20) and then 19.00 (round level). On the flip side, a breach of 14.6836 (monthly low May 4) would expose 14.5458 (monthly low April 12) and finally 14.5136 (weekly low March 29).