USD/TRY: Some resistance emerges around 23.7000

• USD/TRY’s rally encountered a tough barrier near 23.70 so far.
• Retail Sales in Türkiye rose 0.9% MoM, 27.5% YoY in April.
• Investors’ attention shifts to the CBRT meeting on June 22.

USD/TRY keeps the bid bias well and sound, although gains appear to have met a wall around the 23.7000 zone on Tuesday.

USD/TRY now looks at the CBRT event

USD/TRY maintains its bullish stance unaltered for the third session in a row and tests the 23.7000 region in the first half of the week.

The lira has continued to fall sharply despite the appointment of market-friendly officials following Erdogan’s victory in the May 28 second round of the general elections.

The relentless decline in TRY comes in tandem with growing pessimism among investors, both domestic and foreign, about the newly constituted economic team's likely future measures on monetary policy.

Nevertheless, it is uncertain whether the Turkish central bank’s Governor Erkan will be able to assert her monetary influence while working under Erdogan's leadership. The initial round of this battle is anticipated to take place on June 22, during the CBRT monetary policy meeting. There exists a considerable divergence of opinions regarding the appropriate course of action, ranging from minor interest rate increases to a potentially drastic strategy involving a substantial rate hike.

So far, the Turkish currency has already depreciated nearly 28% since the start of 2023, while the decline has reached more than 180% since the CBRT started to reduce the One-Week Repo Rate in August 2021.

Earlier in the session, Retail Sales in Türkiye expanded at a monthly 0.9% and 27.5% YoY in April.

What to look for around TRY

USD/TRY maintains its upside bias well in place, always underpinned by the relentless meltdown of the Turkish currency.

In the meantime, investors are expected to closely monitor upcoming decisions on monetary policy, particularly after President R. T. Erdogan named former economy chief M. Simsek as the new finance minister following the cabinet reshuffle in the wake of the May 28 second round of general elections.

The appointment of Simsek has been welcomed with optimism by market members in spite of the fact that it is not yet clear whether his orthodox stance on monetary policy can survive within Erdogan’s inclination to battle inflation via lower interest rates.

In a more macro scenario, price action around the Turkish lira is supposed to continue to spin around the performance of energy and commodity prices - which are directly correlated to developments from the war in Ukraine, broad risk appetite trends, and dollar dynamics.

Key events in Türkiye this week: Retail Sales (Tuesday) – Budget Balance (Thursday) – End Year CPI Forecast (Friday).

Eminent issues on the back boiler: Persistent skepticism over the CBRT credibility/independence. Absence of structural reforms. Bouts of geopolitical concerns.

USD/TRY key levels

So far, the pair is gaining 0.11% at 23.6228 and faces the next hurdle at 23.6804 (all-time high June 12) followed by 24.00 (round level). On the downside, a break below 19.9718 (55-day SMA) would expose 19.4784 (100-day SMA) and finally 19.0198 (200-day SMA).