USD/TRY forecast ahead of this week CBRT interest rate decision


The USD/TRY price has rallied for the past three consecutive months as forex traders watch the Turkish monetary policy situation. Geopolitical tensions between the US and Turkey has also been in play. It is trading at 8.30, which is 3.25% below its all-time high.

USD/TRY
USD/TRY price action

Turkey inflation concerns ease

The USD/TRY pair is holding steady today as the market reacts to the latest Turkish consumer price index (CPI) data. According to the country’s statistics agency, the headline consumer price index rose by 1.68% in April from 1.08% in March. This increase was lesser than the median estimate of 1.80%. 


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The CPI rose by 17.14% on a year-on-year basis, higher than the previous 16.19% but lower than the expected 17.30%. 

Further data by the agency showed that the producer price index (PPI) rose by 4.34% on a MoM basis and by 35.17%. This increase was also higher than the previous 4.13% and 31.20%. 

Therefore, analysts believe that the slow growth of inflation will likely lead to a mild interest rate decision by the Central Bank of Republic of Turkey (CBRT). Traders have watched the bank closely after President Erdogan replaced Naci Agbal in March. 

In a note, analysts at ING said that they expect the CBRT to leave interest rate unchanged on Thursday this week. They also see a rate cut happening in the third quarter of the year. They wrote:

“Overall, the latest data confirm the still challenging inflation dynamics with demand conditions, elevated services inflation, recent uptrend in commodity prices, TRY weakness and supply constraints during the pandemic.”

In addition to the CBRT decision, the USD/TRY price will react to the upcoming non-farm payrolls (NFP) data from the United States. The market will keep reacting to the latest developments between the US and Turkey relations.

USD/TRY technical forecast

USD/TRY
USD/TRY chart

The daily chart shows that the USD/TRY has been on an upward trend after it declined to 6.9050 in February this year. The pair seems to be forming a cup and handle pattern, which is usually a sign of continuation. It has also moved above the 25-day and 50-day exponential moving averages. Therefore, the pair will remain in a bullish trend so long as the price is above the two averages. This rally will be validated if the price manages to move above the all-time high of 8.5695.



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