- USD/TRY met initial support in the 5.69 region.
- Turkish markets are closed due to Democracy Day holiday.
- Agency Fitch cut domestic sovereign debt to junk.
The Turkish Lira keeps the tight trading conditions vs. the greenback at the beginning of the week, with USD/TRY currently in the middle of the daily range near 5.70.
USD/TRY focused on S-400, CBRT
Spot is struggling for direction on Monday amidst the inactivity in domestic markets due to the Democracy Day holiday.
TRY remains quite resilient, however, after credit agency Fitch cut the country’s sovereign debt to ‘Junk’ over the weekend, matching the ratings from Brazil, Greece and Bangladesh. Fitch justified its decision on the deteriorated institutional independence and credibility over economic policy, particularly after President R.Y.Erdogan removed M.Cetinkaya from the CBRT.
In addition, TRY is expected to remain in centre stage as parts of the Russian S-400 missile defence system will be delivered this week, opening the door to potential diplomatic effervescence with the US.
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 losing 0.12% at 5.7105 and faces the next down barrier at 5.6709 (10-day SMA) followed by 5.5741 (monthly low Jul.4) and then 5.5727 (200-day SMA). On the upside, a surpass of 5.7849 (high Jul.8) would expose 5.8752 (55-day SMA) and finally 5.9326 (monthly high Jun.14).
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