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  • USD/TRY regains upside traction near 8.0000 on Thursday.
  • The stronger dollar adds selling pressure to the lira.
  • Turkey’s 10-year yield approach the 20% mark.

The lira fades Wednesday’s optimism and resumes the downside, lifting USD/TRY back to the vicinity of the 8.0000 neighbourhood on Thursday.

USD/TRY faces further upside near-term

USD/TRY quickly reverses Wednesday’s small gains and returns to the upward path with the immediate target at the key 8.00 mark amidst dollar gains and a moderate pullback in crude oil prices.

In fact, the firm note in the greenback remains well and sound and pushes the US Dollar Index to new 2021 highs, while the barrel of the European Brent crude is down around 3% following Wednesday’s important advance on the Suez Canal issue.

In the meantime, the sentiment around the lira continues to deteriorate, as investors pile up to dump Turkish assets amidst sky-rocketing rates, speculations of an inflationary spiral and bets regarding the potential next move by the central bank (CBRT).


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.

Key events in Turkey this week: March’s Capacity Utilization (Friday).

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.

USD/TRY key levels

At the moment the pair is gaining 0.36% at 7.9512 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 7.4450 (200-day SMA) and then 7.1856 (monthly low Mar.19).