USD/TRY: 21-DMA challenges the road to recovery on final day of 2021

• USD/TRY keeps its recovery rally intact from five-week lows.
• The lira is unable to draw support from the government's support and confidence.
• USD/TRY awaits acceptance above 21-DMA on the road to recovery.

USD/TRY is posting small gains this final trading day of 2021, although remains below the 13.50 psychological barrier.

The pair pauses its four-day recovery rally, as investors adjust their positions heading into the yearly close. A volatile year for the lira, which sees the currency erode nearly 77% of its value against the US dollar amid uncertainty over the Turkish economic and financial policies.

The recent efforts by the Turkish central bank and the government to stem the decline in the lira have failed to create any confidence in the local currency. Earlier this week, the government announced that it will promote the conversion of gold savings into liras.

Meanwhile, “economists and opposition lawmakers called the policy easing recklessly given inflation had climbed above 21% and is expected to soar beyond 30% this month and in the months ahead, due primarily to the sharp lira depreciation,” per Reuters.

Looking at USD/TRY’s technical chart, the recent relief rally is running into the 21-Daily Moving Average (DMA) resistance, currently at 13.36.

A daily closing above the latter is critical to confirm a bearish reversal from multi-week troughs.

The 14-day Relative Strength Index (RSI) is trading above the midline, pointing to more gains on the table.

The December 21 highs of 14.14 will be probed by buyers on a sustained move higher.

Rejection at the 21-DMA could recall sellers, knocking down the currency pair towards the previous day’s low of 12.44, below which the 50-DMA at 11.86 will be tested again.

The next relevant support is seen at Monday’s low of 11.07 will get tested. The last line of defense for buyers is envisioned at 100-DMA at 10.23.

USD/TRY: Daily chart