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  • USD/TRY loses further ground and drops to weekly lows.
  • TRY appears supported after the ceasefire.
  • US sanctions still remain a tangible possibility.

The Turkish Lira continues to regain lost ground on Friday and is now forcing USD/TRY to recede to fresh multi-day lows in the sub-5.7600 region.

USD/TRY weaker on US-Turkey agreement

TRY has accelerated the upside after the US and Turkey agreed a 5-day ceasefire amidst the Turkish military advanced into northern Syria, codenamed ‘Operation Peace Spring’. The truce aims to allow Kurdish fighters (US allies) to retreat from the area that Turkey intends to transform into a ‘safe zone’ for around 2 million of Syrian refugees (from the nearly 3.6 million that are actually in Turkey).

However, the ongoing recovery in TRY carries the potential to be short-lived, as President Trump is facing increasing pressure from the US Congress to impose sanctions against Ankara or Turkish officials/companies following its military offensive.

It is worth recalling that the pair broke above the sideline theme that prevailed throughout September, although the up move stalled around the 5.95 area, where sits a Fibo retracement of the May-August drop.

USD/TRY key levels

At the moment the pair is retreating 0.44% at 5.7816 and faces immediate contention at 5.7536 (38.2% Fibo of the May-August drop) followed by 5.7140 (55-day SMA) and finally 5.6565 (200-day SMA). On the upside, a breakout of 5.9416 (61.8% Fibo of the May-August drop) would open the door to 6.0027 (monthly high Aug.26) and then 6.0753 (78.6% Fibo of the May-August drop).