USD/TRY turns negative below 5.70, focus on economic reforms

• TRY fades the initial pessimism, back around 5.6800.
• FinMin B.Albayrak announced reforms focused on financial sector.
• Turkey Current Account results due tomorrow.

After testing fresh 2-day highs above the 5.7200 handle, USD/TRY has come under some selling pressure and has now receded to sub-5.7000 levels, turning negative for the day.

USD/TRY lost ground post-reforms

The Turkish Lira is now trading on a firmer note as market participants continue to digest the recently announced reforms, mainly aimed to the banking and financial sector.

In fact, FinMin B.Albayrak announced the government will give top priority to structural reforms with the main focus on the exports sector. In addition, the government is expected to aid banks’ lending by injecting fresh money via new issuance of bonds, while the creation of a special fund will target the debt in the construction and energy sectors.

The domestic production of food will also be in the limelight, as imported food has been a source of higher inflation amidst the weakening of the Lira in past months. In this regard, the government aims to reform the agricultural sector as well.

In addition, Albayrak said a new pension system could be announced in the next months, all amidst the continuation of the tight stance in the fiscal policy.

Moving forward, Turkish Current Account figures for the month of February are due tomorrow.

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. In addition, market participants will remain vigilant on the implementation and progress of the structural reforms announced earlier today, 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. However, the geopolitical factor involving US and Israel and the issues around the country’s intention to buy a Russian missile defence system could open the door for US sanctions, putting the Lira under extra pressure.

USD/TRY key levels

At the moment the pair is losing 0.05% at 5.6849 and a break below 5.6055 (10-day SMA) would open the door to 5.5128 (200-day SMA) and then 5.2918 (low Mar.26). On the other hand, the next hurdle emerges at 5.7284 (high Apr.8) seconded by 5.8413 (2019 high Mar.22) and finally 5.8707 (high Oct.23 2018).