USD/TRY forms bullish pennant ahead of the CBRT interest rate decision

Written by: Crispus Nyaga
April 13, 2021
  • The USD/TRY pair has been in a consolidation mode ahead of the CBRT decision.
  • The bank will deliver its interest rate decision this Thursday.
  • Data published today showed that retail sales rebounded in February.

The USD/TRY is hovering near the highest level this year as traders reflect on the positive Turkish retail sales numbers. The data came two days ahead of the closely-watched interest rate decision by the new Turkish central bank governor. 

Turkish lira
Turkish lira chart

Turkey retail sales

The Turkish retail sales numbers bounced back by 3.4% in February as the country continued to reopen its economy. This was a better figure than January’s increase of 0.6%. The increase led to a year-on-year increase of 4.6%, better than the previous 2.6%. Further data revealed that industrial production rose by 8.8% in February. 

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These numbers came a week after the USD/TRY reacted to the rising consumer inflation numbers. Data by the statistics agency showed that consumer prices surged by 16.2% year-on-year after rising by 15.6% a month before. This increase was mostly because of the higher transportation and alcoholic beverages. 

It is against this backdrop that the CBRT will hold its interest rate decision starting tomorrow. It will deliver its rate decision on Thursday afternoon. This will be the first interest rate decision by the new CBRT governor who has long praised low-interest rates. He was appointed last month after the previous governor hiked interest rates. 

Therefore, since the new governor has not delivered a monetary policy speech, it is relatively difficult to predict what he will do. The median estimate is that the bank will leave the headline interest rates unchanged at 19.0%. It will also leave the overnight borrowing and lending rates at 17.50% and 20.50%, respectively. 

The decision also comes at a time when the Turkish government is ramping up its vaccination efforts. The recent data showed that more than 13.3% of the total population has received at least 1 dose of the vaccine. 9.3% of the population has received two doses. These are relatively strong numbers among emerging market countries.

USD/TRY technical forecast

USD/TRY technical chart

The daily chart shows that the USD/TRY pair has been in a tight range in the past few days. This is after the pair rose following the dismissal of Naci Agbal. The pair has formed what looks like a bullish pennant pattern that is shown in green. It has also moved above the 25-day and 15-day exponential moving averages. You can learn more about technical analysis in our free forex trading course.

Therefore, in my view, the pair will likely rebound as bulls target last year’s high of 8.5812. This will likely happen if the CBRT decision is dovish.