- USD/TRY comes under selling pressure near 5.75.
- Turkey Consumer Confidence next on tap on Thursday.
- FOMC minutes due later today ahead of Powell on Friday.
After recording fresh tops near 5.75 on Tuesday, USD/TRY met some moderate downside pressure and is now approaching the key support at 5.70.
USD/TRY capped by the 100-day SMA
After three consecutive days posting losses, the Turkish Lira has managed to regain some composure on Wednesday on the back of the steady tone in the Greenback ahead of key events later today and Friday.
In fact, the EM FX space has been hurt in past sessions as the prospect for a US recession at some point in 2020/2021 appears to have lost some traction following the brief inversion of the 2y-10y yield curve. Against this backdrop, TRY abandoned the area of multi-month tops vs. the buck near 5.45 (August 8) and drifter lower.
In the domestic docket, Retail Sales expanded 2.3% MoM during June, surpassing estimates, while the Central Government Debt Stock ticked lower to TRY 1,215.8 billion for the month of July. Tomorrow, Consumer Confidence for the current month is due.
Later today, the FOMC will publish its minutes from the last meeting while investors’ attention is also expected to shift to the speech by Fed’s Powell at the Jackson Hole Symposium 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 and fears of a technical recession at some point in the next couple of years in the US has undermined extra gains in the Lira. 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 losing 0.14% at 5.7164 and faces immediate contention at 5.6819 955-day SMA) followed by 5.5666 (200-day SMA) and then 5.4494 (monthly low Aug.8). On the other hand, a surpass of 5.7479 (monthly high Aug.20) would expose 5.7849 (monthly high Jul.8) and finally 5.9326 (monthly high Jun.14).
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