USD/TRY in fresh yearly tops just shy of 18.00

• USD/TRY resumes the upside and approaches 18.00.
• Renewed buying interest in the dollar lifts the pair.
• Investors’ attention shifts to the release of July CPI on Wednesday.

The Turkish lira resumes its depreciation and lifts USD/TRY to new 2022 highs closer to the 18.00 hurdle on Tuesday.

USD/TRY now looks to CPI results

 After two consecutive daily pullbacks, USD/TRY regains upside traction and trades closer to the key 18.00 hurdle, or new YTD tops, on Tuesday.

The re-emergence of the risk aversion on US-China jitters props up the better tone in the greenback and the safe haven universe, putting in consequence the EM FX space back under extra pressure.

In addition, investors are expected to remain wary in the next hours ahead of the release of inflation figures in Türkiye for the month of July on Wednesday, with consensus expecting the CPI to surpass the 80.0% mark over the last twelve months.

What to look for around TRY

The upside bias in USD/TRY remains unchanged and stays on course to revisit the key 18.00 zone.

In the meantime, the lira’s price action is expected to keep gyrating around the performance of energy prices, which appear directly correlated to developments from the war in Ukraine, the broad risk appetite trends and the Fed’s rate path in the next months.

Extra risks facing the Turkish currency 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. In addition, there seems to be no Plan B to attract foreign currency in a context where the country’s FX reserves dwindle by the day.

Key events in Türkiye this week: Inflation Rate, Producer Prices (Wednesday).

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. Presidential/Parliamentary elections in June 23.

USD/TRY key levels

So far, the pair is gaining 0.50% at 17.9491 and faces the immediate target at 17.9545 (2022 high August 2) seconded by 18.2582 (all-time high December 20) and then 19.00 (round level). On the other hand, a breach of 17.1903 (weekly low July 15) would pave the way for 17.0110 (55-day SMA) and finally 16.0365 (monthly low June 27).