USD/TRY resumes the upside, climbs to 5.90

• USD/TRY moves higher after two daily pullbacks.
• Turkey rejected Trump’s letter. US sanctions loom.
• Operation ‘Peace Spring’ remains well in place.

The Turkish Lira has resumed the downside on Thursday and is now lifting USD/TRY to the vicinity of the 5.90 level, where some decent resistance appears to have emerged.

USD/TRY focused on Syria”¦ and Trump

The offered bias seems to have returned to the Turkish currency in the second half of the week and is now prompting the pair to reverse two daily pullbacks and refocus on the upside.

TRY trades on a soft fashion today as the likeliness of US sanctions against the country has picked up traction after President R.T.Erdogan ‘dismissed’ a letter from President Trump earlier in the morning. In the meantime, the US Congress has intensified its pressure on Trump’s recent decision to pull back army troops from Syria.

In the Turkish calendar, in the meantime, Industrial Production contracted 3.6% on a year to August, intensifying the contraction recorded in the previous month. Additional data saw Retail Sales expanding at a monthly 0.3% and the Budget deficit came in at TRY 17.71 billion in September.

What to look for around TRY

The outlook on the Turkish Lira has deteriorated further following the start of the military operation in Syria and the subsequent threats of US sanctions. That said, TRY is expected to remain well under heavy pressure both on the geopolitical and domestic economic front, while the psychological 6.00 mark is back on the radar. On the latter, scepticism among investors regarding the ability of the country to finally 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 – crucial to bring in more stability to the currency and sustainability to domestic fundamentals – remains on the rise and cast dark clouds over occasional bouts of strength in the currency.

USD/TRY key levels

At the moment the pair is gaining 0.12% at 5.8910 and a surpass of 5.9416 (61.8% Fibo of the May-August drop) would open the door to 6.0027 (monthly high Aug.26) and then 6.0753 (78.6% Fibo of the May-August drop). On the other hand, the next support emerges at 5.7689 (21-day SMA) followed by 5.6553 (200-day SMA) and finally 5.6367 (monthly low Sep.30).