USD/TRY in 7-month highs, next target at 6.00

The Turkish Lira keeps losing ground on Monday and is now lifting USD/TRY to fresh multi-months highs near the critical 6.00 mark.

USD/TRY higher as US sanctions looms

Bad start of the week for the Turkish Lira. Indeed, TRY is extending its downside momentum vs. the buck in response to the increasing likelihood that the country could be hit by US sanctions following the military incursion in Northern Syria.

The pair has accelerated the up move after breaking above the multi-session sideline theme that prevailed throughout September, all amidst escalating geopolitical tensions that were in fact aggravated after Turkey put into motion the so-called ‘Operation Peace Spring’.

Other than geopolitics, today’s docket showed Turkey’s Industrial Production contracted 3.6% on a year to August, extending July’s 1.1% contraction and somehow adding to TRY weakness.

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. 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 1.00% at 5.9324 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 5.7536 (38.2% Fibo of the May-August drop) followed by 5.6941 (55-day SMA) and finally 5.6374 (200-day SMA).