USD/TRY is on a bearish consolidation pattern ahead of the Turkish retail sales. In the prior release, TURKSTAT indicated that retail sales had risen by 19.2% on a year-on-year basis. That was a significant surge from April’s 4.7%. On a month-on-month basis, the retail sales were up by 5.1% in May compared to 3.4% in April.
The Turkish inflation data comes a week after President Erdogan hinted at interest rate cuts starting from the July-August period. Inflation in the country has remained in the double digits for over three years. Analysts and investors alike are of the opinion that interest rates need to remain high to avoid cost inflation.
On the part of the US dollar, USD/TRY is still reacting to the US inflation data released on Thursday. Despite the higher-than-expected CPI numbers, the Fed’s narrative carried the day. After the knee-jerk reaction that pushed the dollar index to an intraday high of 90.31, it has dropped to its current 90.00.
USDTRY technical outlook
USD/TRY is on a bearish consolidation pattern after plunging in the previous session from an intraday high of 8.6013 to 8.4180. At the time of writing, it was up by 0.07% at 8.4387. On a two-hour chart, it is trading below the 25 and 50-day exponential moving averages. With an RSI of 23, the currency pair is within the oversold territory.
I expect USD/TRY to rebound to 8.5060, which is along the 25-day EMA. If the bulls manage to push the price past that level, the next target will be at 8.6000. On the flip side, it may trade sideways as it finds support at 8.4000.