USD/TRY looks weaker, drops to lows near 8.4300

• USD/TRY loses further ground and tests the 8.4300 region.
• Turkey’s Retail Sales expanded 0.7% MoM, 12.3% YoY in July.
• Markets’ attention gradually shifts to the CBRT meeting.

The Turkish lira appreciates further and drags USD/TRY to new daily lows in the 8.4300 region on Monday.

USD/TRY weaker post-Turkey data

USD/TRY leaves behind Friday’s advance and refocuses on the downside despite the continuation of the upside momentum in the US dollar.

Indeed, the pair now looks consolidative in the upper end of the range, with gains so far limited around the 8.5000 zone, where also coincides the 55-day SMA.

The recent uptrend in spot follows increasing concerns among investors of a potential reduction of the One-Week Repo rate by the Turkish central bank (CBRT) in the near-term future, particularly after the central bank shifted its focus to the core inflation figures as the benchmark for setting the policy rate (away from the usual headline inflation, which is higher). It is worth recalling that the CBRT reiterated at its latest event that the key policy rate will be set above the current inflation rate.

The lira meets extra support following auspicious results from the domestic docket after Industrial Production expanded 8.7% on a year to July, showing some loss of momentum from the previous reading. In addition, Retail Sales expanded 0.7% inter-month and 12.3% from a year earlier. Further data saw the Current Account deficit shrinking to $0.68B in July (from $1.13B).

USD/TRY key levels

So far, the pair is losing 0.28% at 8.4338 and a drop below 8.2590 (monthly low Sep.6) would aim for 8.1316 (low Apr.29) and finally 8.0347 (200-day SMA). On the other hand, the next up barrier lines up at 8.5063 (55-day SMA) followed by 8.5172 (monthly high Sep.9) and then 8.5578 (high Aug.20).