USD/TRY stays on the defensive, extends the downside to 9.4600

• USD/TRY remains in corrective mode and tests sub-9.50 levels.
• Turkey’s Economic Confidence Index eased to 101.40 in October.
• The lira regains some ground following Monday’s all-time low.

The Turkish lira appreciates for the third session in a row and now drags USD/TRY to the 9.4600 region just to bounce soon afterwards.

USD/TRY retreats from all-time highs

USD/TRY extends the negative streak for the third day on Wednesday in response to fresh buying interest surrounding the lira and the persistent offered stance in the greenback.

Indeed, declining US yields hurt the dollar and prompt the US Dollar Index (DXY) to reverse two consecutive daily advances and refocus instead on the downside.

Spot, in the meantime, regains downside traction and puts further distance from Monday’s new all-time highs past the 9.8000 mark. It is worth recalling that the lira collapsed at the beginning of the week in response to President Erdogan’s threats over the weekend to expel 10 foreign ambassadors, a move that could have opened the door to a new crisis between Ankara and the West.

The outlook for the lira did nothing but worsen over the past sessions, starting with the unexpected decision by the Turkish central bank (CBRT) to reduce the One-Week Repo Rate by 200 bps to 16% at its meeting on October 21.

In the domestic data space, Turkey’s Economic Confidence Index ticked lower to 101.40 for the current month (from 102.40). In addition, the trade deficit nearly halved in September at $2.55B (from $4.26B).

USD/TRY key levels

So far, the pair is losing 0.23% at 9.5084 and a drop below 9.4128 (weekly low Oct.26) would aim for 9.1965 (weekly low Oct.21) and finally 9.1605 (20-day SMA). On the other hand, the next up barrier lines up at 9.8395 (all-time high Oct.25) followed by 10.0000.