USD/TRY prints new 2019 highs near 6.2500 on Lira concerns

• TRY depreciates to fresh lows vs. the greenback today.
• US-China trade dispute weighs on EM FX space.
• CBRT suspends One-Week Repo Rate auctions (again).

The Turkish Lira is now facing increasing selling pressure, lifting USD/TRY to fresh yearly peaks in the boundaries of the 6.25 handle.

USD/TRY focused on trade, politics

The Lira regained extra selling pressure on Thursday after the Turkish central bank (CBRT) announced it suspended the One-Week Repo Rate for a period of time ‘considering the developments in financial markets’.

It is worth recalling that the central bank has used the same measure prior to the municipal elections in late March, triggering – among other consequences – a spike in the overnight rate swap to as high as 1,350%.

On the domestic front, the opposition party CHP has started its search for potential allies to strengthen its position vs. Erdogan’s AK Party in light of the metropolitan elections in Istanbul due on June 23.

What to look for around TRY

The Lira is seen under increasing selling pressure for the time being. The broader sentiment around the EM FX space should continue to influence on TRY via rising uncertainty around the US-China trade talks. In addition, friction between the AKP and its main opposition party ahead of the municipal elections in Istanbul is also emerging as another source for Lira weakness. Further out, potential US sanctions following the purchase of the Russian missile defence system keeps lingering over the country as well as sanctions over Iranian crude oil exports. Adding insult to injury, the independence and credibility of the CBRT should remain under the microscope against the omnipresent conflict between the Erdogan’s administration and bank’s authorities.

USD/TRY key levels

At the moment the pair is gaining 0.70% at 6.2208 and faces the next up barrier at 6.2457 (2019 high May 9) seconded by 6.8353 (high Aug. 30 2018) and finally 7.0831 (all time high Aug.13 2018). On the other hand, a break below 6.0281 (200-hour SMA) would open the door for 5.9121 (21-day SMA) and then 5.7094 (low Apr.17).