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  • USD/TRY meets decent support in the 8.0000 neighbourhood.
  • Turkey bans the use of cryptos as payment instruments from April 30.
  • The CBRT left the One-Week Repo Rate unchanged at 19.00%.

The Turkish lira gives away part of its recent gains and lifts USD/TRY to the 8.1000 area at the end of the week.

USD/TRY meets support around 8.0000

After four consecutive daily pullbacks, USD/TRY resumes the upside and rebounds from the strong support in the 8.0000 neighourhood.

Following a very volatile session on Thursday, the pair closed the session in the negative territory as the lira managed to reverse the bout of weakness in the wake of the CBRT event.

Indeed, it is worth recalling that the Turkish central bank (CBRT) kept the key One-Week Repo Rate intact at 19.00% on Thursday, matching the broad consensus among market participants.

The central bank, however, removed the pledge to keep the tight monetary conditions from the statement, noting instead that the policy rate will be set above the inflation rate. This move clearly opens the door to interest rate cuts in the months to come, as inflation is expected to have peaked in April or May.

Further news from Turkey cites the country announced the ban of cryptocurrencies as payment instruments. This measure kicks in in April 30.

So far, the lira lost 12% of its value vs. the greenback since President R.T.Erdogan replaced former CBRT Governor N.Agbal with S.Kavcioglu on March 19.

What to look for around TRY

The near-term outlook for the lira remains fragile to say the least. Despite keeping rates unchanged at Thursday’s meeting, Governor S.Kavcioglu is gradually expected to reverse (wipe out) the shift to a market friendly approach of the monetary policy that was successfully implemented by former Governor N.Agbal back in November 2020. Against this, it will surprise nobody to see the CBRT returning to the unorthodox/looser monetary stance in the next months, opening the door to further lira depreciation, FX reserves exodus and rising bets on a Balance of Payment crisis. Against this backdrop, it will surprise nobody to see spot trading around 10.00 in the medium-to-longer run.

Eminent issues on the back boiler: Potential US/EU sanctions against Ankara. Government pressure on the CBRT vs. bank’s credibility/independence. Bouts of geopolitical concerns. Much-needed structural reforms. Growth outlook vs. progress of the coronavirus pandemic. Capital controls? The IMF could step in to bring in financial assistance.

USD/TRY key levels

At the moment the pair is advancing 0.75% at 8.0660 and faces the next up barrier at 8.2231 (weekly high Apr.12) followed by 8.4526 (2021 high Mar.30) and then 8.5777 (all-time high Nov.6 2020). On the other hand, a drop below 7.9843 (monthly low Apr.2) would aim for 7.5471 (200-day SMA) and then 7.1856 (monthly low Mar.19).