USD/TRY: Range bound theme stays intact just below 18.00

• USD/TRY keeps the side-lined trading below 18.00.
• Türkiye Current Account deficit came at $3.46B in June.
• US Producer Prices contracted 0.5% MoM in July.

USD/TRY reverses two consecutive daily pullbacks and resumes the upside near 17.96 on Thursday.

USD/TRY holds on just below 18.00

Bulls keep pushing harder but there seems to be a huge resistance in the 18.00 neighbourhood so far.

Indeed, while the selling bias around the Turkish lira remained well in place in the past couple of weeks, the contention area around the 18.00 mark has so far held on pretty well.

In the domestic calendar, the Current Account deficit shrank to $3.46B in June (from $6.47B).

In the meantime, investors have started to shift their focus to the upcoming monetary policy meeting by the Turkish central bank (CBRT) on August 18, where consensus remains so far biased towards another “on hold” stance despite inflation ran at the fastest pace since 1998 at nearly 80% YoY in July.

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 and commodity prices - which are 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 (despite rising less than forecast in July), real interest rates remain entrenched in negative figures and the political pressure to keep the CBRT biased towards low interest rates remains 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: End year CPI Forecast, Industrial Production, Retail Sales (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. Presidential/Parliamentary elections in June 23.

USD/TRY key levels

So far, the pair is gaining 0.92% at 17.9524 and faces the immediate target at 17.9874 (2022 high August 3) 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 16.2471 (100-day SMA) and finally 16.0365 (monthly low June 27).