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  • USD/TRY dropped below 5.70, clinching fresh daily lows.
  • The Lira regains some poise after Monday’s sell-off.
  • Attention remains on the next steps by the CBRT.

The Turkish Lira is now regaining some ground lost yesterday and is dragging USD/TRY to the sub-5.70 region, or daily lows.

USD/TRY looks to CBRT, US events

After two consecutive daily advances, spot appears to have met important resistance in the 5.80 neighbourhood amidst some resurgence of TRY buying and despite the continuation of the up move in the buck.

It is worth recalling that President Erdogan unexpectedly (?) removed former Governor M.Cetinkaya on Saturday. The move by Erdogan abruptly ended a protracted dispute with the central banker, which always gyrated around the government push for lower rates vs. the bank’s tight monetary stance.

In the meantime, investors continue to look for further details on the potential monetary policy measures from the newly appointed CBRT Governor M.Uysal, who is expected to give a press conference in the upcoming days.

Moving forward, the pair should be under scrutiny via price action around the buck in light of Chief Powell’s testimony before the Senate and the publication of the FOMC minutes, all due tomorrow and with the likeliness of rate cuts at the July meeting in the centre of the debate.

What to look for around TRY

All the looks are now upon the freshly appointed Governor of the CBRT, Murat Uysal, who is expected to give a press conference at some point in the next days. Despite Uysal already emphasized the independence of the central bank and its commitment to price stability will remain intact, unease around investors – and the Lira – is likely to gather steam pari passu with the perception that a new easing cycle could be in the offing despite how untimely that decision might be in the near term at least. This likely scenario is supported by the view that President Erdogan (desperately) wants to reactivate the stagnant economy via higher credit from domestic lenders. To do that, he needs lower interest rates, which can spark fresh inflationary pressures, social unrest and most likely another crisis in the currency.

USD/TRY key levels

At the moment the pair is receding 0.56% at 5.6993 and faces immediate contention at 5.5794 (200-day SMA) followed by 5.5741 (monthly low Jul.4) and then 5.3918 (78.6% Fibo retracement of the 2019 rally). On the upside, a surpass of 5.7849 (high Jul.8) would expose 5.8909 (55-day SMA) and finally 5.9326 (monthly high Jun.14).