- USD/TRY adds to Friday’s gains and tests the 5.57 area.
- US-China trade fears weigh on the EM FX universe.
- Turkey labour market report, Industrial Production due later this week.
The Turkish Lira is extending the selling bias at the beginning of the week and is now lifting USD/TRY to fresh multi-day tops in the 5.57 area.
USD/TRY focused on trade concerns
After bottoming out in levels just below 5.45 on Thursday, or new four-month lows, the pair has managed to regain some upside bias in tandem with increasing jitters on the US-China trade front.
In fact, outflows from the EM space appear to have accelerated late last week after President Trump has practically discarded a trade agreement with China, at least in the near term. However, it is worth recalling that both parties will meet again next month in the US in order to resume negotiations.
Later in the week, the Turkish labour market report is due on Thursday ahead of Friday’s Industrial Production figures and the Budget Balance.
What to look for around TRY
The Lira met strong resistance in the 5.45 area so far, or multi-month highs vs. the Greenback. However, the current preference for safer assets in response to the US-China trade war has undermined extra gains in TRY for the time being. On another front, newly appointed Governor M.Uysal appears to have inaugurated an Erdogan-sponsored easing cycle following the recent interest rate cut by the CBRT. Whether this move was untimely (as regarded before the rate cut) it remains to be seen. In the meantime, TRY remains supported by the ongoing ‘hunt for yield’, as domestic rates still look attractive in spite of the recent cut. On the more macro view, the country needs to implement the much-needed structural reforms (announced in April) to bring in more stability to the currency and sustain a serious recovery in both economic activity and credibility.
USD/TRY key levels
At the moment the pair is gaining 1.29% at 5.5597 and a surpass of 5.6076 (21-day SMA) would expose 5.7025 (50% Fibo of the February-May up move) and finally 5.7727 (high Jul.25). On the downside, the next support emerges at 5.4494 (monthly low Aug.8) followed by 5.3918 (78.6% Fibo of the February-May up move) and then 5.2918 (monthly low Mar.29).
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