Just TRY To Stop This Rally In USD/TRY

 | Jun 15, 2015 03:09PM ET

As the sun rises on a new trading week, the US dollar is edging lower against most of its major rivals, despite rising concerns about Greece’s debt negotiations and a measure of optimism heading into Thursday’s FOMC meeting. Interestingly, the dollar’s weakness against the G10 currencies has not uniformly spilled over into the EM FX realm, where the greenback is actually rallying against the Turkish lira and the South African rand.

USD/TRY: Just TRY and Stop This Rally

In last week’s EM Rundown report, we highlighted the ruling AKP party’s disappointing results in the general election, concluding that “[i]n the long run, the vote in favor of limited power should benefit Turkey’s economy and currency, but the immediate prospect of political uncertainty has caused traders to sell the lira first and ask questions later.” A week on, not much has changed, with the AKP still trying to cobble together a coalition government to avoid a snap election.

Last week, USD/TRY dipped down to fill most of the post-election gap, but the pair looks like it may be resuming its rally today. Rates are now back above key resistance at the previous all-time high (2.73) and bulls may look to target last week’s peak above 2.80 or the 161.8% Fibonacci extension near 2.8560 as long as the current political malaise remains unresolved. With no economic data of note due until next week’s CBRT meeting, Turkish politics and the performance of the US dollar as a whole will drive USD/TRY this week.