- USD/TRY sidelined below the 5.77 handle.
- Turkey trad deficit shrunk to TRY 1.84 billion in May.
- Trump-Xi meeting will be key for EM FX space.
The Turkish Lira keeps trading within familiar ranges at the end of the week, with USD/TRY navigating around the 5.77 handle ahead of key events.
USD/TRY focused on G-20, US sanctions
Spot navigates within a narrow range on Friday, with the upside capped by the confluence of the 10-day and 21-day SMAs at/below the 5.8000 area for the time being.
The Lira and the rest of the EM FX space will be closely following the developments at the G-20 event in Japan, where President Trump and his peer Xi Jingpin will try to clinch a deal following the protracted trade dispute.
TRY gained some momentum following late-May tops in the 6.15 region, all in response to rising speculations over the probability of rate cuts by the Federal Reserve as early as at the July meeting. However, subsequent Fedspeak, including Chief J.Powell, talked down that scenario in the very near term although lower rates remain well on the cards in the next months.
On the domestic front, the US-Turkey effervescence over the purchase of the Russian missile defence system appears to have lost some traction in favour of increasing attention over the G-20 event. However, the issue remains unresolved and could surely be a source of potential pressure for TRY.
In today’s docket, Turkey’s trade deficit shrunk to TRY1.8 billion during May. In the US data space, inflation figures measured by the PCE will be in the limelight seconded by Personal Income/Spending and the final print of Consumer Sentiment.
What to look for around TRY
Recently, the CBRT left no doubts it will continue to support the current tight monetary conditions. However, the enduring disinflation process seen in past months opens the door to a potential shift from the central bank to a more accommodative stance, including the palpable chance of rate cuts despite this move on rates appears untimely in the near (and medium) term. On the positive view, TRY could gain some support along with the rest of the EM FX space in response to the recent shift of the Federal Reserve to a more dovish view on it monetary conditions. On the not-so-bright side emerges the protracted US-China trade dispute and its impact on the global growth. Still on the negatives, the country keeps delaying the implementation of the much-needed structural reforms, which carries the potential to undermine prospects of economic growth in the medium-to-longer run.
USD/TRY key levels
At the moment the pair is up 0.03% at 5.7695 and faces the next resistance at 5.9085 (55-day SMA) followed by 5.9326 (high Jun.14) and finally 6.1516 (high May 23). On the flip side, a breakdown of 5.7116 (low Jun.24) would aim for 5.7025 (50% Fibo retracement of the 2019 rally) and then 5.6560 (low Jun.5).
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