USD/TRY Forecast Ahead of Turkish Central Bank Interest Rate Decision

USD/TRY has been range-bound since the beginning of April. The pair’s price movement has largely been influenced by the US dollar and bond market. After hitting its highest level in over a year at 1.77 at the end of March, the benchmark US 10-year bond yields have declined to the current 1.65. 1.60 remains the yields’ support level since mid-March.

With bond yields having a close correlation to the value of the US dollar, the currency has fallen from its 5-month high of around 93.44 to Monday’s 92.24.

This week, USD/TRY will be impacted by the Turkish Central Bank Rate Decision scheduled for Thursday. This will be the first monetary policy set by the new governor, Sahap Kavcioglu.

Unlike the previous governor who believed in dealing with inflation by hiking interest rates, Kavcioglu holds a different opinion. Last month, Governor Kavcioglu hinted at the lowering of the rates as early as April. Investors will be evaluating the central bank’s decision in light of the weakening Lira and rising inflation.  

USD/TRY Technical Outlook

In mid-March, USD/TRY surged by about 15% on a single session after President Recep Tayyip Erdogan unexpectedly fired Central Bank’s governor, Naci Agbal. The pair ended the month close to the 4-month record high of 8.4880 by trading at 8.4520. However, it has since pulled back, forming a consolidation pattern that has lasted since the beginning o April.

On a four-hour chart, USD/TRY s trading along the 14 and 28-day exponential moving averages. At its current price of 8.1820, its resistance level remains at 8.2000. The outlook remains rather neutral as investors focus on the Turkish Central Bank Rate Decision. A move on the upside will have the bulls target 8.4000 and the prior record-high of 8.4880.

However, this thesis will be invalidated if the price moves past 8.1020 to the downside. If that happens, the levels to watch out for are the psychological 8.0000 and 7.8000.  

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