USD/TRY drops to weekly lows near 5.6700

The Turkish Lira is trading on a firm note vs. the greenback on Wednesday and is now dragging USD/TRY to fresh weekly lows in the 5.6700 region.

USD/TRY weaker after data

TRY is appreciating uninterruptedly since Monday, extending the rejection from last week’s tops in the vicinity of the 5.80 mark.

The Lira is prolonging the upside momentum despite the latest Reuters Poll suggested the economy is expected to contract 1.5% this year vs. the government’s projection of a 2.3% expansion. Economists asked at the poll see the economy expanding 2.4% next year and 3.4% in 2021.

In the meantime, parts of the Russian S-400 missile defence system continue to land in Ankara, although there is still no news regarding a potential escalation in tensions with the US and the probability of sanctions.

Further news around the CBRT noted there will be no forex depo auction today.

In the docket, Turkish Retail Sales expanded at a monthly 0.3% during May, reversing the previous 1.8% contraction, and led by an increase of 0.5% in non-food sales (excluding fuel). Further data saw the Total Turnover Index up by 1.1% inter-month during the same period.

What to look for around TRY

Recently, the newly appointed CBRT Governor M.Uysal left no doubts the central bank will continue to support price stability in a context of total independence. This view will surely be put to the test at the next monetary policy meeting later in the month. However, the enduring disinflation process looks unabated, as reflected in the performance of consumer prices during June and this could open the door to a potential shift from the central bank to a looser monetary stance, including the palpable chance of rate cuts despite this move on rates appears somewhat untimely in the near term. On another direction, the country needs to implement the much-needed structural reforms (announced in April) to bring in more stability and start a serious recovery in both economic activity and credibility.

USD/TRY key levels

At the moment the pair is losing 0.30% at 5.6841 and faces the next down barrier at 5.6758 (low Jul.17) followed by 5.5741 (monthly low Jul.4) and then 5.5685 (200-day SMA). On the upside, a surpass of 5.7500 (100-day SMA) would expose 5.7849 (high Jul.8) and finally 5.8653 (55-day SMA).