USD/TRY looks firm and prints fresh tops around 18.4500

The Turkish lira unsurprisingly extended its march southwards and pushed USD/TRY to fresh all-time tops around 14.85 at the beginning of the week.

USD/TRY: Next on the upside comes 18.5000

USD/TRY trades with gains for the second session in a row on Monday and saw its upside reinvigorated following another bout of solid demand for the greenback, which continue to hurt the risk complex and the EM FX galaxy.

Indeed, it has been all about the greenback since the Federal Reserve raised rates last week and Powell reinforced the hawkish rhetoric, all supportive of a tighter-for-longer stance from the central bank.

Data wise In Türkiye, Capacity Utilization improved to 77.4% in September (from 76.7%) and the Manufacturing Confidence receded to 99 (from 102.1) in the same period.

What to look for around TRY

USD/TRY picked up extra pace following another unexpected interest rate cut by the CBRT, while the persevering rally in the dollar also helped the pair to print record highs almost on a daily basis.

So far, price action around the Turkish lira is expected to keep gyrating around the performance of energy and commodity prices - which are directly correlated to developments from the war in Ukraine - the broad risk appetite trends and the Fed’s rate path in the next months.

Extra risks facing the Turkish currency also come from the domestic backyard, as inflation gives no signs of abating (despite rising less than forecast in July and August), real interest rates remain entrenched well in negative territory and the political pressure to keep the CBRT biased towards low interest rates remains omnipresent.

In addition, the lira is poised to keep suffering against the backdrop of Ankara’s plans to prioritize growth (via higher exports and tourism revenue) and the improvement in the current account.

Key events in Türkiye this week: Capacity Utilization, Manufacturing Confidence (Monday)- Economic Confidence Index (Thursday) – Trade Balance (Friday).

Eminent issues on the back boiler: FX intervention by the CBRT. Progress of the government’s scheme oriented to support the lira via protected time deposits. Constant government pressure on the CBRT vs. bank’s credibility/independence. Bouts of geopolitical concerns. Structural reforms. Presidential/Parliamentary elections in June 23.

USD/TRY key levels

So far, the pair is gaining 0.20% at 18.4407 and faces the next hurdle at 18.4583 (all-time high September 26) followed by 19.00 (round level). On the downside, a break below 17.9798 (55-day SMA) would expose 17.8590 (weekly low August 17) and finally 17.7586 (monthly low