USD/TRY volatile, fades the spike beyond 5.91

The Turkish Lira is giving away part of recent gains and is now lifting USD/TRY to level beyond 5.91 the figure although the up move lost traction afterwards.

USD/TRY looks to CBRT, FOMC

After two consecutive daily pullbacks, spot has apparently found decent support in the 5.82 neighbourhood, where is located the 10-day SMA.

Recent disappointing results from Industrial Production and Retail Sales in the Turkish economy coupled with escalating concerns over probable US sanctions against the country after the purchase of the Russian defence system have been weighing o the Lira, although losses looks limited around the 5.93 yardstick.

Later in the session, the CBRT will publish its minutes from last week’s meeting, while June’s Consumer Confidence and the Central Government Debt Stock figures in May are both due tomorrow.

Across the Atlantic, the FOMC will grab all the attention, with the main focus on the fresh ‘dots plot’ and new projections for economic growth and inflation.

What to look for around TRY

The Turkish Lira has been losing ground since monthly peaks in the 5.65 region (June 5). At last week’s meeting, the CBRT left no doubts it will continue to support the current tight monetary conditions. However, the enduring disinflation process seen in past months opens the door to a potential shift from the central bank to a more accommodative stance, including the palpable chance of rate cuts despite this move on rates appears untimely in the near (and medium) term. Real headwinds for the Lira, however, remain well and sound and loom from the increasing likeliness of US sanctions and further escalation in US-Turkey tensions around the Russian S-400 defence system. It does not get better for TRY if we include in the equation the probable acceleration of outflows from the EM space in response to the deterioration of the US-China trade scenario and the plausible increase of domestic effervescence in the run up to the municipal elections in Istanbul due on June 23. That said, another move to the psychological yardstick at 6.00 the figure in the short-term horizon should be everything but ruled out.

USD/TRY key levels

At the moment the pair is gaining 0.69% at 5.8642 and faces the next up barrier at 5.9326 (high Jun.14) followed by 5.9893 (23.6% Fibo retracement of the 2019 rally) and finally 6.1516 (high May 23). On the downside, a breakdown of 5.7025 (50% Fibo retracement of the 2019 rally) would open the door to 5.6560 (low Jun.5) and then 5.6139 (200-day SMA).