USD/TRY: Bulls lack conviction to break above 16.00

• USD/TRY trades on the defensive after faltering near 16.00.
• The offered stance in the greenback gives support to the lira.
• Turkey 10y note yields rose to multi-week highs around 25%.

The renewed downside in the greenback gives extra legs to the riskier assets and motivates USD/TRY to shed some ground following recent 2022 highs in the area just below the 16.00 yardstick.

USD/TRY weaker on USD-selling

Fears of an economic slowdown and a “hard landing” of the US economy weigh on the greenback and US yields, supporting in turn the first move lower in the pair after ten consecutive daily advances on Thursday.

The better note in the lira is also accompanied by the move higher in the Turkey 10y bond yields, which climb to the 25% region for the first time since later March.

The Turkish currency, in the meantime, remains bid despite persistent geopolitical tensions in Ukraine and after President Erdogan declined to support both Finland and Sweden intentions to join the NATO.

What to look for around TRY

USD/TRY keeps the upside  bias well and sound so far this week 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: Consumer Confidence (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 losing 0.49% at 15.8418 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 15.9750 (2022 high May 18) seconded by 18.2582 (all-time high December 20) and then 19.00 (round level).