USD/TRY stuck in a range as it ignores key macro events

The USD/TRY has gone nowhere in the past few weeks despite important market developments. It is still stuck at 19, which is a few points below the year-to-date high of 19.31. The pair’s price action has resembled that of the USD/HKD, which is limited by the Hong Kong dollar peg.

Turkish lira ignores key events

The USD/TRY price has ignored three important events in the past few months, signaling that the CBRT’s liraization policy is working. First, it remained in a consolidation phase after the massive earthquakes that led to thousands of deaths. The earthquakes are also expected to have an impact on the country’s economy.

Second, the pair has ignored the extremely hawkish tone by the Federal Reserve. As I wrote in this article, the Federal Reserve Chair warned that the bank will be tougher on inflation than expected. It now expects to hike interest rates by 0.50% in March instead of the previous 0.25%. 

Therefore, the Turkish lira was unchanged even as other developed and emerging market currencies plunged.

Third, and most importantly, the pair has reacted mildly to the ongoing political issues in Turkey. This week, the fractured opposition party picked Kemal Kılıçdaroğlu to be their candidate in the upcoming election in May.

Kılıçdaroğlu will face Recep Erdogan, who has been in power in the past two decades. One of their pledges is to make the CBRT independent, which will return the monetary policy to normal times. If this happens, we could see the Turkish lira bounce back since its crash was engineered by the CBRT.

Instead of hiking interest rates, the CBRT has slashed them in the past few months even as inflation has remained at an elevated level. Therefore, the current USD/TRY price action is mostly because investors still believe that Erdogan will maintain his seat.

USD/TRY forecast

USD/TRY chart by TradingView

Conducting technical analysis on the USD to TRY forex pair has been a bit tough in the past few months. That’s because the pair has remained in a consolidation phase for so long. The pair remains slightly above the 25-day and 50-day moving averages while the Average True Range (ATR) has moved sideways. 

Therefore, the pair will likely remain at 19 in the coming days. The only news that will move the USD/TRY pair will be opinion polls showing that the opposition has a chance of winning the election.