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  • The Turkish Lira regains some ground near 6.05.
  • The 10-day SMA around 6.05 offered contention so far.
  • US April inflation figures coming up next.

Finally some respite for the Turkish Lira, which is now dragging USD/TRY to fresh lows in the 6.05 area, coincident with the 10-day SMA.

USD/TRY focused on US-China trade talks

TRY has regained some composure against the backdrop of the multi-month up trend that kicked in in February and took spot from the 5.15 region to yesterday’s new 2019 tops just below the 6.25 area.

In the meantime, the US-China trade talks should remain as the exclusive driver for the price action in the EM FX space as well as in the commodity-bloc. It is worth recalling that the White House raised tariffs on Chinese products worth $200 billion from 10% to 25%.

In addition, TRY managed to leave behind some weakness following yesterday’s press releases by the CBRT, which suspended the One-Week Repo Rate auctions and changed the reserve requirements ratios.

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 retreating 1.01% at 6.1272 and a break below 6.0554 (200-hour SMA) would aim for 6.0494 (low May 10) and then 5.9296 (21-day SMA). On the flip side, the next hurdle emerges 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).