USD/TRY climbs to 2-day tops beyond 5.60

The Turkish currency is depreciating further at the beginning of the week and is pushing USD/TRY to fresh two-day highs in the 5.60 region.

USD/TRY looks to trade, data

Spot is adding to Friday’s gains and is resuming the upside following monthly lows in the 5.45 area (August 8), as the Lira keeps losing momentum on the back of omnipresent US-China trade limbo.

TRY has been gaining ground as of late in tandem with the rest of the EM universe, all underpinned by the idea that looser monetary conditions in Developed Markets (DM) could morph into extra legs for the EM currencies. This view, albeit reasonable and somewhat expected, has been clouded by up&downs from the trade front as well as the renewed idea that a recession could hit the US economy in the months ahead, sponsoring the recent exodus to the safe havens.

Later in the week, and with Turkish markets back to normalcy, the Central Government Debt Stock is due tomorrow followed by August Consumer Confidence due on Thursday.

In the US, the most salient event will be the Jackson Hole Symposium on ‘Challenges for Monetary Policy’ and the speech by Chief J.Powell on Friday.

What to look for around TRY

The Lira met strong resistance in the 5.45 area so far, or multi-month highs vs. the Greenback. However, the current preference for safer assets in response to the US-China trade war has undermined extra gains in TRY for the time being. On another front, newly appointed Governor M.Uysal appears to have inaugurated an Erdogan-sponsored easing cycle following the recent interest rate cut by the CBRT. Whether this move was untimely (as regarded before the rate cut) it remains to be seen. In the meantime, TRY remains supported by the ongoing ‘hunt for yield’, as domestic rates still look attractive in spite of the recent cut. On the more macro view, the country needs to implement the much-needed structural reforms (announced in April) to bring in more stability to the currency and sustain a serious recovery in both economic activity and credibility.

USD/TRY key levels

At the moment the pair is gaining 0.51% at 5.6032 and a surpass of 5.6347 (monthly high Aug.13) would expose 5.6820 (55-day SMA) and finally  5.7025 (50% Fibo of the February-May up move). On the downside, the next support emerges at 5.4494 (monthly low Aug.8) followed by 5.3918 (78.6% Fibo of the February-May up move) and then 5.2918 (monthly low Mar.29).