USD/TRY: 21-DMA defends buyers above $13.00 as Turkey inflates electricity, gas prices

• USD/TRY pauses five-day uptrend, seesaws around a fortnight high.
• Turkish energy authorities raise electricity, natural gas prices for 2022.
• Market sentiment dwindles with firmer US stock futures, T-bond yields.
• Turkish CPI for December, US Markit Manufacturing PMI should be watched for fresh impulse.

USD/TRY licks its wounds around $13.35 during Monday’s Asian session, after positing the heaviest yearly fall in two decades. In doing so, the Turkish lira pair ignores the downbeat news suggesting further strain to the national inflation.

As per the latest news Reuters, Turkey’s Energy Market Regulatory Authority raised electricity prices around 50% for lower-demand households and more than 100% for high-demand commercial users for 2022. The news adds, “Natural gas prices jumped 25% for residential use and 50% for industrial use in January, national distributor BOTAS said separately. The price rise was 15% for electricity-generating industrial use.”

Higher energy prices will challenge the Turkish government’s latest approach to battle inflation with out-of-the-box approaches. That said, the nation’s headlines Consumer Price Index (CPI) rose to 21.31% in November, expected 30.6% for December during Monday’s publish.

It’s worth noting that Turkish President Recep Tayyip Erdogan tried to regain voters’ confidence ahead of the 2023 elections as the latest polls raise fears for the national leader. "We have been waging the battle to save the economy from the cycle of high interest rates and high inflation," said Erdogan per Reuters.

Elsewhere, receding fears of the coronavirus variant from South Africa, namely Omicron, favor market sentiment at the start of 2022. However, an absence of major traders due to the holiday mood restricts liquidity.

Looking forward, Turkish CPI and final readings of the US Markit Manufacturing PMI for December may offer intermediate clues to the USD/TRY prices.

Technical analysis

USD/TRY’s latest pullback fails to comply with the receding bearish bias of the MACD and the quote’s sustained trading beyond the 21-DMA, which in turn suggests the quote’s further advances.

Even so, the 50% Fibonacci retracement (Fibo.) level of November-December run-up, near $13.95, can challenge short-term USD/TRY upside. Following that, the mid-December peak near $14.65, will precede the $15.00 round figure to lure the bulls.

On the contrary, a downside break of the 21-DMA level of $13.35 will direct the sellers towards the 61.8% Fibo. level near $12.85, a break of which will direct USD/TRY prices towards the 10-DMA support of $12.29.

Overall, USD/TRY remains in the recovery mode with the short-term upside likely limited.

USD/TRY: Daily chart

Trend: Further recovery expected