USD/TRY recedes from tops beyond 5.73 post-CPI

• The Turkish Lira loses ground for another session.
• Recent USD-strength keep EM FX space under pressure.
• Turkey’s CPI rose at an annualized 20.30% in December.

Poor start of the year for the Turkish Lira, which is depreciating for the second session in a row today and is lifting USD/TRY to the vicinity of 5.50 at the time of writing.

USD/TRY hurt by USD-buying, CPI

After testing fresh tops in the boundaries of the 5.74 mark earlier in the session, TRY has managed to regain some ground lost and drag spot to the current 5.48 region, where it is now looking to stabilize.

The recent strong rebound in the greenback put once again the EM FX space under pressure amidst the persistent unease surrounding the US-China trade war and the potential slowdown in the Chinese economy.

In the domestic calendar, consumer prices in Turkey rose at an annualized 20.3% during the last month of 2018 while contracted 0.4% inter-month.

What to look for around TRY

The Turkish Lira is expected to remain under pressure, as the downtrend in inflation could prompt the CBRT to cut rates, deteriorating the outlook for the currency. It is worth recalling that a tighter monetary stance is a source of stability for the Lira in a context where investors’ perception of EM markets still remains fragile. On another front, geopolitical risks including Russia and Syria, albeit dormant for the time being, represent another source of potential increased volatility.

USD/TRY key levels

At the moment the pair is up 1.53% at 5.4740 and a breakout of 5.7386 (2019 high Jan.3) would open the door to 5.8736 (high Oct.23) and finally 6.2293 (high Oct.4). On the flip side, the next support aligns at 5.3204 (21-day SMA) seconded by 5.2113 (low Dec.19) and then 5.1346 (low Nov.29).