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  • The Lira drops to fresh lows vs. the greenback.
  • Istanbul will hold new mayoral elections on 23 June.
  • The pair moved to the boundaries of the 6.20 handle earlier today.

The selling pressure around the Turkish currency has intensified today, lifting USD/TRY to new yearly highs in levels just shy of the 6.20 mark.

USD/TRY higher on political risks

TRY is losing further ground today following the recent decision by the country’s top election board to rerun the municipal elections in Istanbul on June 23. The decision comes after Erdogan’s party, the AKP, said there were irregularities after the opposition’s win on March 31.

The Lira therefore came under further selling pressure today as the likeliness of social unrest is running high amidst a deteriorated democratic scenario in the country.

TRY also remains offered since the latest CBRT meeting, where the central bank kept the One-Week Repo rate unchanged at 24.00%, although it has delivered a somewhat dovish message.

What to look for around TRY

The Lira is expected to remain under heavy pressure for the foreseeable future. While the broader sentiment around the EM FX space is seen influencing on TRY, domestic drivers would also collaborate with the price action. Among these factors is the likely escalation of tensions between the government and the opposition ahead of another mayoral elections in Istanbul on June 23 as well as threats of US sanctions with the Russian missile defence system and the ban to purchase Iranian crude oil in the centre of the debate. In addition, the progress in the implementation of the recently announced structural reforms, conditio sine qua non for the start of a sustainable economic recovery and a return of the confidence in both the currency and the country, will also be under scrutiny. Adding insult to injury, the independence and credibility of the CBRT should remain under the microscope against the omnipresent conflict between the Erdogan’s administration and bank’s authorities.

USD/TRY key levels

At the moment the pair is gaining 0.83% at 6.1332 and faces the next up barrier at 6.1975 (2019 high May 7) seconded by 6.2277 (monthly high Oct.4 2018) and finally 6.5497 (high Sep.13 2018). On the other hand, a break below 5.9708 (200-hour SMA) would open the door for 5.8622 (21-day SMA) and then 5.7094 (low Apr.17).