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  • USD/TRY quickly leaves behind the key 8.0000 mark.
  • Turkey’s Manufacturing Confidence rose to 110.8 in March.
  • Rumours of Balance of Payments crisis have picked up pace.

The Turkish lira remains well into the offered territory and lifts USD/TRY to daily highs well beyond the critical 8.0000 mark.

USD/TRY faces potential upside

USD/TRY is up for the second session in a row and surpasses the 8.000 mark at the end of the week, as the outflows from the Turkish currency stay nothing but unabated.

In fact, the pair managed to reach daily highs in the vicinity of 8.1000 earlier in the session, just to give away some ground afterwards.

In the meantime, the outlook for the lira is expected to quickly deteriorate in the near/medium term, as speculations of a Balance of Payment crisis continue to build up pari passu with forecasts of lower rates amidst higher inflation, all in the context of a fragile banking system that is seen facing extra pressure in the weeks to come.

So far, the lira lost around 10% since Monday’s open, although it managed to claw back some gains following new 4-month lows vs. the buck near 8.3000 at the beginning of the week.

Earlier in the session, Turkey’s Capacity utilization eased a tad to 74.7% in March (from 74.9%) and the Manufacturing Confidence improved to 110.8 (from 109.3) during the same period.

What to look for around TRY

Occasional pockets of strength in the Turkish lira should be seen as temporary only against the current political/monetary backdrop. The new CBRT Governor S.Kavcioglu is 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. President Erdogan’s appointment of Kavcioglu demonstrated once again whose hand is rocking the monetary cradle in Turkey and will most likely be the prelude of the return to unorthodox/looser measures of monetary policy in combination with rapidly rising bets of a balance of payments crisis and a drain of FX reserves. Against this backdrop, it will surprise nobody to see spot trading around 10.00 in the months to come.

USD/TRY key levels

At the moment the pair is gaining 1.02% at 8.0094 and faces the next up barrier at 8.2881 (2021 high Mar.22) followed by 8.5777 (all-time high Nov.6 2020) and finally 9.0000 (psychological level). On the other hand, a drop below 7.7772 (high Mar.9) would aim for 7.4507 (200-day SMA) and then 7.1856 (monthly low Mar.19).