- USD/TRY faces some consolidation around 5.75 today.
- TRY retakes some ground after Monday’s sell-off.
- Powell’s testimony, FOMC minutes key for EM FX space.
The Turkish Lira navigates within a narrow range in the middle of the week, taking USD/TRY to the 5.75 neighbourhood ahead of key US events.
USD/TRY comes down after post-CBRT highs
Spot appears to have met some important resistance below the 5.80 handle on Monday, fresh tops following markets’ reaction after President Erdogan appointed M.Uysal to be the next Governor of the central bank (CBRT) on Saturday.
TRY, however, is expected to remain under pressure as we get closer to the next CBRT meeting on July 25 and while investors keep waiting for the press conference from the new governor.
In the very near term, today’s message from Fed’s Powell at his congressional testimony plus the FOMC minutes should shed further light on the Fed’s plans regarding rate cuts, with direct impact on inflows/outflows from the EM universe.
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 up 0.35% at 5.7490 and a surpass of 5.7849 (high Jul.8) would expose 5.8894 (55-day SMA) and finally 5.9326 (monthly high Jun.14). On the downside, the next support lines up at 5.5786 (200-day SMA) followed by 5.5741 (monthly low Jul.4) and then 5.3918 (78.6% Fibo retracement of the 2019 rally).
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