USD/TRY: Path to New Record Highs Getting Clearer By the Day

The USD/TRY continues its march to the north after the Central Bank of the Republic of Turkey left interest rates unchanged at 14.00% in its last meeting. The decision means that the US Dollar continues to dominate the Lira as expectations of more interest rate tightening by the US Federal Reserve mounts.

At the moment, the playbook for the USD/TRY on the fundamental side of things is monetary policy divergence. The USD/TRY is expected to continue marching to retest the all-time high of 20 December 2021. If the Fed ends up with a 100bps rate hike, this could catalyze a move by the pair into new record territory.

The USD/TRY is now in its 6th day of gains, with the pair gaining 0.68% on the day amid lower volumes than usual. The Turkish Lira’s pathway to new record lows has come on the back of the failure of the CBRT to apply conventional monetary policy to combat rising inflation, which now stands at close to 80%. Fitch Ratings now views the CBRT’s stance as an interventionist one which is “unpredictable.”

USD/TRY Forecast

The break of the previous high at 17.446993 has cleared the way for the bulls to march toward the all-time high at 18.362400. A break of this high, which lies just above the 27% Fibonacci extension at 18.269198, allows the bulls to push the USD/TRY to new record levels. The 61.8% Fibonacci extension at 19.247241 serves as the next target of note to the north. 

On the flip side, a corrective retracement will bring 17.446993 back into the picture as role-reversed support, with 17.156909 (17 December 2021 high) lying closely beneath this level as another downside target. If the bulls fail to defend these support levels, the correction may extend toward the 16.50000 psychological support (24 June low). Additional pivots are found at 15.734358 and the 78.6% Fibonacci retracement at 15.301341.

USD/TRY: Daily Chart