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  • USD/TRY drops to the 5.77/76 area post-CPI.
  • Turkey CPI rose less than expected in August.
  • Focus remains on US ISM Manufacturing, US-China trade.

The Turkish Lira keeps the upside momentum unchanged so far this week and is now dragging USD/TRY to fresh multi-day lows in the 5.77/76 area.

USD/TRY weaker post-CPI

The buying pressure around TRY gathered extra steam today after inflation figures in Turkey tracked by the CPI came in short of expectations for the month of August.

In fact, consumer prices rose at a monthly 0.86% and 15.01% from a year earlier, both prints easing from July’s readings. In addition, Producer Prices followed suit, contracting 0.59% inter-month and gaining 13.45% over the last twelve months.

The continuation of the downtrend in consumer prices allows the CBRT to remain firm on its recently launched easing cycle following the massive rate cut at the July meeting.

What to look for around TRY

The Lira has been appreciating in recent sessions following auspicious results from domestic indicators and the confirmation of the downtrend in inflation. Despite prices are still above forecasts, they remain well on their way to the bank’s year-end target. In addition, hopes of a resumption of the trade talks between the US and China has also supported the sentiment towards the EM FX space. Looking at the broader picture, TRY still looks supported by the ‘hunt for yield’, as domestic rates still look attractive in spite of the recent cut by the CBRT. On the more macro view, the country still 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 losing 0.58% at 5.7698 and faces the next support at 5.7536 (38.2% Fibo of the May-August drop) seconded by 5.6779 (55-day SMA) and then 5.5871 (200-day SMA). On the upside, a surpass of 5.8581 (high Aug.27) would expose 5.9416 (61.8% Fibo of the May-August drop) and finally 6.0027 (‘flash crash’ Aug.26).