USD/TRY challenges 21-DMA support ahead of the critical Turkish central bank decision

• USD/TRY extends declines to test the 21-DMA support.
• The CBRT to hold rates at 19% but could likely turn out dovish.
• Massive volatility is expected on the CBRT outcome, as focus shifts to the US data.

USD/TRY  is on the offers for the fourth straight session this Thursday, although defends the 8.00 level.

The Turkish lira remains in the driver’s seat in the lead-up to the key Central Bank of the Republic of Turkey (CBRT) monetary policy meeting due later today at 1100GMT.

All eyes are on the policy decision, as it is the first CBRT meeting under the new central bank Governor Sahap Kavcioglu, which is envisioned as a watershed moment for the lira.

The local currency has already shed about 9% vs. the US dollar so far this year, in light of the shocking central bank upheaval in March.

Turkey’s President Recep Tayyip Erdogan fired the Deputy Governor of the central bank, less than two weeks after he dismissed the former hawkish CBRT Chief Naci Abgal. Agbal hiked the benchmark interest rates by 200 basis points to 19% last month, a move that called on his unexpected departure.

The new central bank Governor is seen as an advocate of President Erdogan’s unorthodox views on inflation and monetary policy. Investors are, therefore, expecting the CBRT to come in dovish on the policy stance while holding the rates steady at 19%.

On the USD-side of the equation, the  US dollar index  holds onto a tepid rebound from multi-week lows, as markets await the US Retail Sales data for fresh trading impetus

Meanwhile, the TRY traders brace for massive volatility on the policy decision, as it “will be a momentous event,”  according to TD Securities.

USD/TRY: Daily chart

Ahead of the CBRT verdict, the spot is testing the critical upward-sloping 21-daily moving average (DMA) at 8.0250.

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The price has the room to rise as high as March highs of 8.4836, beyond which the record highs at 8.5814 could be challenged.

Meanwhile, to the downside, USD/TRY could drop to test the powerful support around the 7.57 region, which is the intersection of the 50, 100 and 200-DMAs.