USD/TRY flirts with 3-day highs around 16.70

• USD/TRY leaves behind Wednesday’s advance and tests 16.70.
• Türkiye trade deficit widened to TL10.61B.
• Focus now shifts to Monday’s CPI release.

The Turkish lira sheds some ground and pushes USD/TRY to the area of 3-day peaks around 16.70 on Thursday.

USD/TRY appears supported near 16.00

USD/TRY extends the choppy trade so far and regains ground lost following Wednesday’s pullback, aiming once again for the upper-16.00s amidst the persistent upside momentum in the greenback as well as the increasing risk-off mood.

The lira continues to give away part of Monday’s strong gains, which saw the pair slip back to the 16.00 neighbourhood in response to the Turkish banking watchdog’s announcement to ban commercial loans denominated in lira for companies with a strong position in foreign currency (on Friday).

In the domestic calendar, the trade deficit widened to TL10.61B in May (from TL6.11B).

Next on the docket will be the release of key inflation figures for the month of June, due on July 4.

What to look for around TRY

USD/TRY keeps digesting the recent sharp decline and subsequent rebound following Friday’s announcement by the Turkish banking watchdog.

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, although the effects of this new measure aimed at supporting the de-dolarization of the economy will also have its say.

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 Türkiye this week: Trade Balance (Thursday) – Manufacturing PMI (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 gaining 0.67% at 16.6867 and faces the immediate target at 17.3759 (2022 high June 23) seconded by 18.2582 (all-time high December 20) and then 19.00 (round level). On the other hand, a breach of 16.0365 (monthly low June 27) would pave the way for a test of 15.6684 (low May 23) and finally 15.2373 (100-day SMA).