USD/TRY tumbles below 5.50, new four-month lows

The upbeat momentum around the Turkish Lira remains well and sound today, dragging to new multi-month lows in the sub-5.50 region.

USD/TRY breaks below 5.50, focus on trade

The Lira has accelerated the upside after breaking below the critical 200-day SMA a couple of sessions ago and is now trading in levels last seen in early April in the 5.50 region.

The selling mood surrounding the greenback on the back of declining yields has been sponsoring the leg lower in spot, which has entered into its fourth consecutive month and already trades around the 61.8% Fibo retracement of the 2019 up move (February-May).

Positive news from the geopolitical front is also helping TRY after the US-Turkey meeting over a safe zone in northern Syria ended in a constructive tone, according to sources.

On another direction, Finmin B.Albayrak highlighted on Tuesday that demand for mortgage loans climbed to a record high following loan rate cuts from three state-owned banks last week, all giving much-needed oxygen to the construction sector.

In the data space, Turkey’s Current Account results will be the only release of note this week (Friday).

What to look for around TRY

The Lira continues its march north unabated so far. Newly appointed Governor M.Uysal appears to have inaugurated an Erdogan-sponsored easing cycle following last week’s interest rate cuts. 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. TRY, however, is expected to closely follow developments from the trade front, particularly after the recent implementation of new US tariffs, and geopolitics in the Middle East, involving Russia, Syria, Turkey, Iran and the US. 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 0.49% at 5.4928 and faces the next support at 5.3918 (78.6% Fibo of the February-May up move) followed by 5.2918 (monthly low Mar.29) and then 5.1594 (2019 low Jan.31). On the flip side, a surpass of 5.6330 (21-day SMA) would expose 5.7727 (high Jul.25) and finally 5.7849 (monthly high Jul.8).