May 30, 2023

USD/TRY extends range play just below 14.00, ignores Turkey’s lira protection scheme

  • USD/TRY fails to react to the DXY weakness while below the 14.00 barrier.
  • The lira ignores the latest measures under Turkey’s currency protection scheme.
  • Hawkish Fed outlook, 21-DMA keep the buoyant tone intact around the spot.

USD/TRY is holding the higher ground on Tuesday, still well within the recent trading range just below the 14.00 level.

The sentiment around the cross remains underpinned by the hawkish Fed outlook, although markets have resorted to profit-taking in the US dollar longs ahead of Wednesday’s critical inflation data release.

Further, the lira continues to remain vulnerable even though the Turkish government’s stop-gap measures to mitigate the depreciation of the exchange rate.

The Official Gazette showed on Tuesday, Turkey’s authorities have included corporate foreign currency and gold deposit accounts converted to lira in a scheme that protects local currency savings against exchange rate volatility, per Reuters.

Meanwhile, Turkey’s surging inflationary pressures and the Fed’s aggressive tightening expectations continue to bode well for USD/TRY. Traders await Fed Chair Jerome Powell’s confirmation hearings for fresh hints on the timing of the rate hikes and a potential balance sheet run-off.

USD/TRY: Technical outlook

Looking at USD/TRY’s technical chart, the pair is on track to confirm the third straight Doji candlestick on the daily sticks.

This suggests signs of clear indecision on the side of the USD/TRY traders. The bias, however, remains tilted to the upside, as the 14-day Relative Strength Index (RSI) holds comfortably above the midline.

Acceptance above the 14.00 supply zone is critical for buyers to extend the recovery momentum from near 10.25 troughs.

The December 21 high of 14.14 will come into play on a sustained break above 14.00.

On the downside, the previous resistance of the 21-Daily Moving Average (DMA), now at 13.33, offers fierce support, which if broken will trigger a sharp sell-off towards the January 3 low of 12.75.

Further south, the bullish 50-DMA of 12.44 could save the day for bullish traders.

USD/TRY: Daily chart

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