- USD/TRY bounces off fresh 2-month lows near 5.65.
- The 200-day SMA offered decent contention on Wednesday.
- USD recovers some composure amidst rate cut chatter.
The Turkish Lira is now depreciating moderately vs. its American peer and is lifting USD/TRY to the area above the 5.78 handle, where lost some upside vigour.
USD/TRY looks to trade, data
After reaching tops above 6.15 in mid-May, the Lira has been gathering traction in tandem with the resurgence of the selling bias in the buck, which in turn rendered in extra support to the EM universe.
It is worth mentioning that the prospects of rate cuts by the Federal Reserve in response to a probable slowdown in the US economy has undermined the bull run in the greenback seen during May.
In addition, US-China trade jitters appear to have re-emerged in past hours and have been also weighing down on TRY and the rest of the risk-associated assets.
What to look for around TRY
The Turkish Lira is attempting to stabilize around 2-month lows in the 5.65 region, coincident with the 200-day SMA. As usual, trade effervescence should remain as key driver in the EM FX space, while frictions between the AKP and its main opposition party in the run up to the municipal elections in Istanbul are also emerging as another source for Lira volatility albeit on the domestic front. Further out, potential US sanctions following the purchase of the Russian missile defence system keeps lingering over the country as well as sanctions over Iranian crude oil exports. Additionally, the independence and credibility of the CBRT should remain under the microscope against the omnipresent conflict between the government and the bank’s authorities. Recently, another focus of attention has emerged after the IMF urged the government to start implementing reforms aimed to bring back stability to the country’s fundamentals.
USD/TRY key levels
At the moment the pair is gaining 0.67% at 5.7626 and faces the next up barrier at 5.8456 (55-day SMA) followed by 5.9803 (21-day SMA) and then 6.1516 (high May 23). On the flip side, a breach of 5.6560 (low Jun.5) would open the door to 5.6458 (200-day SMA) and then 5.6124 (100-day SMA).
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