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16 Mar 2023

USD/TRY bulls poke 19.00 as global banking crisis joins Turkiye’s geopolitical hardships

  • USD/TRY grinds higher around intraday top amid sluggish markets.
  • Financial market fears from Credit Suisse, SVB join floods, earthquakes and looming general elections in Turkiye to lure bulls.
  • Second-tier US data, bond market moves are key for clear directions.

USD/TRY remains mildly bid near 19.00 as buyers keep the reins despite the US Dollar pullback during early Thursday. In doing so, the Turkish Lira (TRY) pair seems to justify fears emanating from the key banks, as well as geopolitical fears surrounding Turkiye. It’s worth noting, however, that the market’s consolidation mode seem to probe the pair’s latest upside.

That said, the latest fears emanating from Europe’s G-SIB – a global systemically important bank, namely Credit Suisse, renew fears of the 2008 financial crisis as it follows fallouts of the US banks, namely Silicon Valley Bank (SVB) and Signature Bank. Also highlighting the fears are headlines from Bloomberg suggesting China’s securities regulator is holding up approvals for new applications to sell global depository receipts, according to people familiar with the situation, potentially choking off a lucrative stream of listings in Europe.

It should be noted that the floods and earthquake probe serious threats to Turkish leader Recep Tayyip Erdoğan as he has to ally with a smaller party to confirm a majority in the May month general elections.

The risk-off mood underpinned the US Dollar’s haven demand and previously weighed on the USD/TRY prices before paring the gains a bit amid inactive Treasury bond yields.

The latest pullback in the US Treasury bond yields could be linked to the news that Credit Suisse's eyes borrowing up to CHF50 billion from the Swiss National Bank (SNB) to strengthen liquidity gained major attention and allowed USD/TRY bears to take a breather. On the same line could be the news that anonymous sources conveyed that the US banks are less vulnerable to the Credit Suisse debacle. Furthermore, the emergency talks by the Bank of England (BoE) and market chatters suggesting no immediate negative reaction by the Federal Reserve (Fed) and ECB, during their monetary policy meetings, also seem to tame the previous risk aversion. Recently, Goldman Sachs came out with its upwardly revised economic forecasts for China and tried to put a floor under the USD/TRY prices.

Looking ahead, bond market moves and geopolitical headlines from Turkiye may entertain the USD/TRY traders. Also important to watch will be the second-tier US data about employment, manufacturing and housing activities.

Technical analysis

Bullish MACD signals join the firmer RSI (14) line, not overbought, to keep USD/TRY buyers directed towards the all-time high marked the previous week near 19.10. Alternatively, pullback remains elusive unless breaking the late 2021 peak of 18.40.

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