USD/TRY meets support near 5.70

The Turkish Lira is easing some ground after Wednesday’s positive session, motivating USD/TRY to regain some upside bias after bottoming out in sub-5.70 levels.

USD/TRY looks to trade, data and sanctions

The pair is down for the third consecutive week so far today, extending the leg lower after hitting monthly peaks in the 5.95 region in mid-October.

The recent appreciation of the Lira came on the back of somewhat diminishing concerns of potential US sanctions against the country following the military advance in northern Syria. This possibility, however, remains well on the cards in light of the increasing pressure and anti-Turkish sentiment in the US congress.

In the domestic docket, the Turkish trade deficit shrunk to $2.06 billion during September, with exports expanding 0.3% and imports 0.1%.

On another front, the CBRT published its minutes from the latest meeting, emphasizing the need to sustain the ongoing disinflationary process, which is view as key for ‘lower sovereign risk, lower long-term interest rates and stronger recovery”.

Later in the week, Turkey manufacturing PMI is due on Friday along with critical US Non-farm Payrolls and the ISM manufacturing.

What to look for around TRY

The outlook on the Turkish Lira remains under scrutiny since the military incursion into Syria and the prospects of US sanctions against the country. That said, price action around the Lira should gyrate around geopolitics and the domestic front, particularly on monetary policy and following the persistent reduction of interest rates by the CBRT, as this is expected to meet increasing scepticism from investors regarding the sustainability of such a policy amidst a fragile economic outlook and the so far absence of the much-needed structural reforms to back President Erdogan’s promise of 5% GDP growth in the next years.

USD/TRY key levels

At the moment the pair is gaining 0.33% at 5.7153 and a breakout of 5.7496 (55-day SMA) would expose 5.8476 (50% Fibo of the May-August drop) and then 6.0027 (monthly high Aug.26). On the downside, immediate contention emerges at 5.6946 (low Oct.30) followed by 5.6751 (200-day SMA) and finally 5.6367 (monthly low Sep.30).