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  • The Lira drops to fresh yearly lows vs. the greenback.
  • Spot remains close to the psychological 6.00 handle.
  • Focus stays on the decision on Istanbul elections today.

Following a couple of sessions within a sideline theme, USD/TRY has broken above it and briefly reached fresh 2019 highs beyond the psychological 6.00 mark earlier in the day.

USD/TRY now looks to Istanbul elections

The resurgence of the risk-off sentiment in the global markets in response to rising concerns on the US-China trade front is weighing on the EM FX space and the Lira in particular, pushing spot to levels above the 6.00 handle for the first time since mid-October 2018.

On the domestic scenario, TRY remains under scrutiny as the Supreme Election Council will decide later today on a probable re-run of the mayoral elections in Istanbul.

Further weakness hitting TRY comes from lower prices in crude oil, with the Brent crude receding to the $70.00 mark per barrel so far today. Still around crude oil, TRY keeps following the developments from the US-Iran front regarding the end of the waivers programme, which could directly impact on the country’s performance of consumer prices.

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 imminent decision on the possibility of a rerun of the municipal elections in Istanbul, threats of US sanctions over the purchase of a Russian missile defence system and 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. In addition, TRY could see some acceleration of the selling impetus in response to the omnipresent conflicts between the Erdogan’s administration and the CBRT, which could undermine the independence of the central bank.

USD/TRY key levels

At the moment the pair is gaining 0.63% at 5.9971 and faces the next up barrier at 6.0027 (2019 high May 6) seconded by 6.2277 (monthly high Oct.4 2018) and finally 6.5497 (high Sep.13 2018). On the other hand, a break below 5.9450 (200-hour SMA) would open the door for 5.8368 (21-day SMA) and then 5.7094 (low Apr.17).