USD/TRY Forecast Ahead of Turkey's Inflation Data

Summary:

USD/TRY is trading lower ahead of Turkey's CPI and PPI data. Turkish central bank has adjusted its inflation forecast from 9.4% to 12.2%.

USD/TRY is trading lower early on Monday ahead of Turkey’s inflation data. The numbers come at a time when President Tayyip Erdogan and central bank’s governor Sahap Kavcioglu have insisted that hiking interest rates will only hurt the economy.

In the quarterly inflation report released last week, the country’s central bank placed its inflation forecast at 12.2%, up from 9.4%. Kavcioglu, who replaced a hawkish governor, has indicated that the bank will successfully bring down inflation to the targeted 5% by 2024. Goldman Sachs expects inflation to rise to 18% by the end of 2021.

On Sunday, the Institute of International Finance (IIF) raised its estimates of the Lira’s fair value against the US dollar from 7.50 to 9.50. The adjustment was a reaction to the weak sentiment. In today’s session, analysts expect a CPI reading of 1.80% MoM compared to 1.08% in March. Besides, it will be interesting to see if the PPI numbers exceed March’s 4.13%.

USDTRY Technical Outlook

USD/TRY has begun the new month at a lower note by trading at 8.2925, down by 0.04%, early on Monday. The formation of an inverted head-and-shoulder pattern is an indication that the pair will rise in the near term. To further support this thesis, it is trading above the 25 and 50-day exponential moving averages.

I expect USD/TRY to surge to 8.3500 in the ensuing sessions. Above that point, the bulls will be eyeing April’s high of 8.4863. However, before reaching that target, it is likely to experience some resistance and sideways trading moments.

This thesis will be invalidated by a move below the neckline at 8.2500. If that happens, the levels to watch are 8.2000 and 8.1500.