USDTRY hits new record high; CBRT expected to sharply raise interest rates on June 22

USDTRY extends steep ascend of past two weeks and hit new record high on Monday morning, after starting week with gap-higher opening.

There are no firm signs that the latest rally may run out of steam, as initial signals (Thursday’s close in red and Friday’s long-legged Doji) were offset by higher opening on Monday.

Extremely overbought daily/weekly studies suggest that bulls may take a breather after sharp bullish acceleration, as last week’s rally marked the biggest weekly gain since mid-December 2021, though still lacking clearer signal.

Treaders focus on CBRT’s June 22 policy meeting, as the finance minister and central bank governor in the new cabinet signaled a sharp turn in monetary policy towards more orthodox methods.

Wall Street banks, in the latest comments, pointed to a number of monetary and fiscal adjustments needed to stabilize the economy, expecting Turkish central bank to raise interest rate from current 8.5% to 22% and likely to reach 30% by the end of the year.

They also see possibility that rate would rise to 40% if the CBRT employs fully orthodox policy and suggest that rate could drop towards 25% if conditions stabilize.

However, markets are cautiously optimistic, as sharp policy tightening by the world major central banks in past one year, so far did not provide expected relief, as inflation in all most developed economies remains stubbornly high.

Turkey’s GDP outlook for 2023 has also been downgraded from initial forecast at 2.9% to 2.3% and economy is expected to enter recession in the second half of the year, due to sharp tightening in credit conditions.

Bulls focus psychological 24.00 barrier, ahead of Fibo projections at 24.5713 and 26.4966 (Fibo 176.4% and 200% of the uptrend from Dec 2021 low at 10.20).

Price adjustments are likely to be shallow for now and to face solid supports in the 23.00 zone, ahead of next week’s policy meeting.

Res: 23.6956; 24.0000; 24.5713; 26.4966
Sup: 23.4014; 23.0000; 22.4026; 22.0000