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  • USD/TRY drops and tests 5.63, rebounds afterwards.
  • Turkey trade deficit shrunk to TRY 2.50 billion in August.
  • FinMin B.Albayrak unveiled The New Economic Program.

The Turkish Lira is gaining extra momentum at the beginning of the wee, dragging USD/TRY to fresh 6-week lows in the 5.63 region.

USD/TRY looks to domestic events, trade

The Lira managed to pick up extra pace on Monday after FinMin B.Albayrak announced in Ankara the ‘New Economic Program’, which addresses fundamentals such as inflation, growth, employment, the current account and exports for the 2020/2022 period.

Under this new program, Albayrak also revised the inflation target and he now sees consumer prices rising 12% this year, 8.5% in 2020, 6% in 2021 and 4.9% in 2022. In the same line, the economy is expected to expand 0.5% the current year and 5% in 2020, 2021 and 2022.

In addition, the government has also embarked in a tax reform, while it expects the current account to return to the positive territory this year.

In the domestic docket, the Economic Sentiment receded to 86 in September (from 87.1) on the back of a lower consumer and manufacturing confidence. Today, the trade deficit shrunk to TRY2.50 billion during last month.

Further out, TRY – and the rest of the EM FX space – should remain vigilant on the upcoming US-China trade talks, expected to resume early next month.

What to look for around TRY

The Turkish Lira has been trading within a consolidative mood vs. the US Dollar since early September. The lower bound of the range, where sits the 200-day SMA around 5.62, remains unbroken however. TRY has digested very well the two consecutive (massive) interest rate cuts by the CBRT since President R.T.Erdogan appointed M.Uysal as Governor, although investors remain sceptical of further strength in the currency in light of a still debatable ability of the country to embark on a more sustainable growth path (Erdogan set a target of 5% GDP growth in 2020) and to implement the much needed structural reforms, which remain crucial to bring in more stability to the currency and sustainability to domestic fundamentals. On the broader view, TRY looks supported by the ‘hunt for yield’, positive headlines from the US-China trade developments and prospects of extra interest rate cuts by the Federal Reserve.

USD/TRY key levels

At the moment the pair is losing 0.28% at 5.6466 and faces the next support at 5.6251 (200-day SMA) seconded by 5.5344 (low Aug.16) and then 5.4494 (monthly low Aug.8). On the upside, a surpass of 5.7040 (21-day SMA) would aim for 5.7453 (100-day SMA) and finally 5.7913 (high Sep.11).