USD/TRY: Lira pares intraday losses around $13.50 ahead of Turkish budget data

• USD/TRY struggles to extend previous day’s losses, retreats from intraday high.
• Finance Minister Nureddin Nebati said Turkey's annual inflation rate will be in single digits before mid-2023.
• US holidays will restrict market moves amid inactivity of the bonds, equities markets.

USD/TRY drops towards $13.52 while consolidating intraday gains heading into Monday’s European session. In doing so, the Turkish lira (TRY) pair portrays the market’s indecision ahead of the country’s Budget data for December amid an off in the US bond and equities markets.

It’s worth noting that the hawkish comments from Turkey’s Finance Minister (FinMin) Nureddin Nebati propelled the TRY prices despite overall US dollar strength the previous day. Turkish FinMin Nebati said, per Reuters, “Inflation in Turkey will come down to single digits by the time of presidential and parliamentary elections set for mid-2023 after it soared to a 19-year high of 36% in December.”

Turkish diplomat also signaled further conversion of forex holdings to Turkish lira in the coming weeks, which in turn signals further USD/TRY weakness.

It should be observed that the US dollar’s pullback during a sluggish session adds to the USD/TRY pullback. That said, the US Dollar Index (DXY) fails to extend the previous day’s U-turn from the lowest levels since November 10, down 0.01% intraday to refresh daily lows at 95.14 by the press time. The greenback gauge cheered hints of faster rate-hikes, mainly due to virus-led negative impacts on inflation, on Friday.

Hawkish comments from Federal Reserve Bank of San Francisco President Mary Daly and New York Fed President John Williams contrasted downbeat US data on Friday to propel the DXY. Though, TRY had its reasons to rise, namely hopes of easing inflation and softer USD.

Looking forward, a holiday in the US will join a light calendar, except for Turkish Budget Balance for December, prior 32B, which may restrict USD/TRY moves. Though, recent weakness in the USD and firmer sentiment for TRY may keep the quote pressured.

Technical analysis

Failures to cross the 50% Fibonacci retracement (Fibo.) of October 26 to December 20, 2021 upside, around $13.90, keep USD/TRY sellers hopeful. However, the 20-DMA level of $12.95 precedes the 61.8% Fibo. level surrounding $12.82 to test the short-term bears.