USD/TRY upside halted around 5.70, focus on elections results

• Another weak performance by the Turkish currency.
• Spot clinched fresh tops in the 5.70 region in early trade.
• President Erdogan’s AKP lost Ankara and probably Istanbul.

The Turkish Lira comes under extra downside pressure at the beginning of the week, sending USD/TRY to fresh tops in the 5.7000 neighbourhood.

USD/TRY stronger post-local elections

Sellers kept the Lira under pressure early on Monday, lifting the pair to the 5.7000 region, where it appears to have met significant resistance for the time being.

In fact, TRY has extended the downside momentum after results from Sunday’s municipal elections saw President Erdogan’s ruling party, the AKP, losing Ankara and on the way to also lose Istanbul, according to latest news. However, the AKP and its coalition partner – the Nationalist Movement Party (MHP) – gained around 50% of the national vote.

TRY is expected to remain volatile in the upcoming weeks, as market participants will now gauge the potential implementation of populist measures by Erdogan (as a consequence of yesterday’s results) vs. the much-needed structural reforms.

What to look for around TRY

The Lira is expected to remain under pressure in the near to medium terms, always tracking the performance of the risk-associated complex and specifically around the EM FX universe. Following the elections on Sunday, all the attention will now be on the implementation of (promised) structural reforms, conditio sine qua non for the start of a sustainable economic recovery and a return of the confidence in both the currency and the country.

USD/TRY key levels

At the moment the pair is gaining 0.15% at 5.5768 and faces the next hurdle at 5.7003 (high Apr.1) seconded by 5.8413 (2019 high Mar.22) and finally 5.8707 (high Oct.23 2018). On the downside, a break below 5.2918 (low Mar.26) would open the door to 5.2028 (low Dec.19 2018) and then 5.1594 (2019 low Jan.31).