• TRY is on the defensive near the 6.10 handle vs. USD.
  • The 21-day SMA around 5.96 offers weekly support.
  • Turkey jobless rate came in at 14.7% in February.

The Turkish currency is losing ground on Wednesday and is pushing USD/TRY to the vicinity of the key 6.10 mark.

USD/TRY stronger, looks to trade, US docket

Following yesterday’s daily gains, the Turkish Lira appears to have resumed the downside today on the back of omnipresent US-China trade concerns and domestic politics.

In fact, optimism over an eventual deal to end the current US-China trade war have been sustaining a mild upbeat mood during early trade, although it has dissipated since the opening bell in Euroland, giving legs to the recovery in the buck.

In the meantime, a Turkish court decided to keep US consulate employee in jail for the time being. The accused, a Turkish national, is imprisoned on terrorism-related charges. This situation reminds of that involving US pastor A.Brunson and it could spark another bout of frictions between the US and Turkey.

In addition TRY remains vigilant on the political campaign to attract undecided voters ahead of the critical municipal elections in Istanbul on June 23.

In the domestic data space, the jobless rate ticked higher to 14.7% in February and Retail Sales expanded at a monthly 1.0% during March, adding to the previous 0.8% gain. These results add to yesterday’s positive print from the Industrial Production, which continues its recovery.

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 volatility. 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 gaining 0.88% at 6.0782 and faces the next hurdle 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). On the other hand, a breach of 5.9630 (21-day SMA) would open the door to 5.9472 (low May 10) and then 5.6497 (200-day SMA).

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