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USD/TRY Uptrend Remains Strong As Safe Haven Appeal and Inflation Concerns Weigh In


USD/TRY steep ascent continued on Friday, with the pair gaining 0.32% to trade at 32.5985. High inflation rate, continues to rock Turkey’s economy, with the figure above 68% as of this writing. Furthermore, the end year CPI forecast for released on Friday came in at 44.16%, a marginal decline from the previous 44.19%.

The lira will get support from the small rise in foreign reserves held by the Turkish Central Bank after it revealed that the figure rose from $68.75 billion to $70.19 billion as of April 18. On March 21, Turkey raised interest rates to 50% to prevent the lira from hemorrhaging, but that is also expected to batter an economy that was already struggling with slow growth.   

Meanwhile, the US dollar is likely to continue strengthening not only against the lira, but also a host of other global currencies due to its safe haven appeal. Israel is reported to have bombed Turkey’s neighbor, Iran, on Friday, and that is expected to raise geopolitical tension in the Middle East.

The dollar got more propulsion on Thursday when the initial jobless claims figures came in at 212k, lower than the forecast 215k. This is expected to offset some of the losses brought by weaker data from the US housing sector. Having said that, Turkish inflation is expected to influence USD/TRY exchange rate in the near term and medium term. That could see a continuation of steady sub-1% gains by the dollar in intra-day trading in the coming weeks.

Technical analysis

USD/TRY has a strong upward momentum as signaled by the RSI indicator. The pivot is at 32.5810, and the upside will prevail if the buyers keep the rate above this mark. That could provide propulsion to 32.6498, and possibly higher up to test 32.7029 in extension. However, a move below the pivot will favour the sellers, with support at 32.5098. A continuation of control by the bears could break the support, thereby invalidating the upside narrative and testing 32.4488 in extension.