The exchange rate remained range-bound on Monday as investors braced for another report of high Turkish inflation. The pair was trading at 32.21, where it has been stuck for the past few days. This price is a few pips below the yearly high of 32.8.
Turkish inflation data
The USD/TRY pair will be in the spotlight as the Turkish Statistics Agency releases the latest consumer inflation data. Economists polled by Reuters expect the annualized inflation rate to continue soaring in May.
The median estimate is that the CPI rose from 69.80% in April to 74.80% in May, its highest level in several years. On a monthly basis, analysts estimate that the overall CPI slowed from 3.18% to 3.0%
These figures will come a few weeks after the Central Bank of Turkey (CBT) raised its year-end inflation target. Officials expect the annual CPI to end the year at 38%, higher than the previous estimate of 36%.
Most economists believe that May was the country’s annual inflation peak. People polled by Reuters estimate that annual inflation will fall by 10% in July and August. They also believe that the 38% inflation target set by the BCT is very ambitious. In a statement, Selva Bahar Baziki of Bloomberg said:
“Our baseline view is that the central bank will maintain its policy rate at 50% until the third quarter of this year, with any threats to the inflation trajectory managed by tightening its alternative tools. We expect the central bank to start cutting rates in the fourth quarter.
Rate cuts by the BCT in times of double inflation will be bearish for the Turkish lira. Ideally, central banks cut interest rates sharply when inflation is falling or contained.
USD/TRY technical analysis
TradingView USD/TRY chart
The USD/TRY exchange rate remained stuck in a tight range on Monday as traders focused on upcoming Turkish inflation data. It was trading at 32.21, a few points below the year’s high of 32.81.
The pair’s Average True Range (ATR) indicator has fallen to 0.20, signaling that its volatility has dried up. Additionally, the Relative Strength Index (RSI) has fallen below the neutral point of 50, which is a sign of a lack of momentum.
Therefore, the pair will likely remain in this range over the coming days as traders await US non-farm payrolls (NFP) data. The main support and resistance levels to watch will be 31.50 and 32.81.
This article appeared first on Invezz.com France
