- USD/TRY appears sidelined around 5.7700 on Thursday.
- The resurgence of trade tensions put the EM space under pressure.
- Final US Q1 GDP figures came in at 3.1%, matching estimates.
The Turkish Lira is following the broad-based rangebound trade prevailing the global markets and is now prompting USD/TRY to hover around the 5.77 area inthe wake of the release of key US data.
USD/TRY looks to trade, data
The pair is now alternating gains with losses around the 5.7700 handle following three consecutive daily declines and with weekly gains limited around the 5.8300 area for the time being.
TRY has been holding up quite well in recent days on the back of rising speculations of potential rate cuts by the Federal Reserve and diminishing trade tension ahead of the critical G-20 event in Japan and the likely meeting between President Trump and China’s Xi Jingpin.
On another direction, news agency Reuters cited three Turkish officials saying the Treasury ministry could be working on a bill aimed to shore up the government’s budget via a transfer of the CBRT’s TRY40 billion in legal reserves. The unorthodox move also intends to bring in stability to the currency and push the country out of the recession.
What to look for around TRY
Recently, the CBRT left no doubts it will continue to support the current tight monetary conditions. However, the enduring disinflation process seen in past months opens the door to a potential shift from the central bank to a more accommodative stance, including the palpable chance of rate cuts despite this move on rates appears untimely in the near (and medium) term. On the positive view, TRY could gain some support along with the rest of the EM FX space in response to the recent shift of the Federal Reserve to a more dovish view on it monetary conditions. On the not-so-bright side emerges the protracted US-China trade dispute and its impact on the global growth. Still on the negatives, the country keeps delaying the implementation of the much-needed structural reforms, which carries the potential to undermine prospects of economic growth in the medium-to-longer run.
USD/TRY key levels
At the moment the pair is up 0.01% at 5.7701 and faces the next resistance at 5.9081 (55-day SMA) followed by 5.9326 (high Jun.14) and finally 6.1516 (high May 23). On the flip side, a breakdown of 5.7116 (low Jun.24) would aim for 5.7025 (50% Fibo retracement of the 2019 rally) and then 5.6560 (low Jun.5).
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