USD/TRY extends its weekly rally above 12.6000 as Turkey's inflation expectations risen up to 30%

• The Turkish lira continues its free fall, down some 6% daily.
• The CBRT central bank revealed that it would monitor exchange rates, though it does not have a price target.
• Turkey’s inflation expectations for December are 30.6%, the largest since 2003.
• USD/TRY Price Forecast: As the spot price is above all the DMAs, bullish.

The USD/TRY advances for the third consecutive day, trading at 12.6129 during the New York session at the time of writing. The Turkish lira 6% slides amid concerns over surging inflation and the CBRT unorthodox monetary policy.

On Wednesday, the CBRT said it “will closely monitor exchange rate developments and related risk factors and continue to take the necessary measures and employ due instruments,” as reported in its annual report for 2022. Furthermore, the bank said it would use reserve requirements to support the pursuit of price and financial stability objectives.

Per the CBRT report, the central bank would monitor the decision in the first quarter. It would reassess the policy framework to create a “foundation for sustainable price stability.”

In the meantime, Turkish annual inflation is expected to hit 30.6% in December, per Reuters poll, breaching the 30% threshold for the first time since May 2003. The Turkish Treasury benchmark 10-year bond yield rose to 24.87%, from 24.55% a day earlier.

USD/TRY Price Forecast: Technical outlook

The USD/TRY previous week’s rally stalled on Monday around the 100-day moving average (DMA) at 10.0491, leaving the abovementioned dynamic support level. Furthermore, Monday’s USD/TRY rally was capped at the 50-DMA, though it pierced that level on Wednesday, clearing the way toward higher price levels.

To the upside, the USD/TRY first resistance level would be the December 22 daily high at 12.6737. A breach of the latter would expose the December 3 high at 13.8879, followed by the December 21 high at 14.3800.