USD/TRY clings to gains around the 6.00 handle

  • Spot keeps looking to US-China trade for direction.
  • TRY stays vigilant on Istanbul elections campaign.
  • The 21-day SMA at 5.9724 offers initial contention.

The Turkish Lira keeps the familiar range so far this week and is now taking USD/TRY to the 6.00 neighbourhood.

USD/TRY looks to trade, risk

Broad risk trends around the EM space continues to rule the sentiment around the Lira along with rising concerns over the US-China trade dispute despite the lack of fresh headlines as of late.

In the meantime, the pair continues to trade in the lower end of the weekly range following last Friday’s sharp sell off and correction lower from YTD tops near the 6.25 handle.

In the domestic calendar, End Year CPI Forecast ticked a tad higher to 16.68% for the current month (from 16.23%). Earlier in the week, Industrial Production and Retail Sales surprised to the upside while the budget deficit shrunk to $18.32 billion in April.

What to look for around TRY

The Lira is seen under increasing selling pressure for the time being. The broader sentiment around the EM FX space should continue to influence on TRY via rising uncertainty around the US-China trade talks. In addition, friction between the AKP and its main opposition party ahead of the municipal elections in Istanbul is also emerging as another source for Lira volatility. 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. 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 0.32% at 6.0115 and faces the next hurdle at 6.0623 (10-day SMA) seconded by 6.2457 (2019 high May 9) and then 6.8353 (high Aug. 30 2018). On the other hand, a breach of 5.9472 (low May 10) would aim for 5.7094 (low Apr.17) and finally 5.6333 (200-day SMA).

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