TRY another short - TDS

Analysts at TD Securities suggested a trade in the current volatility in USD/TRY.

Key Quotes:

"Short USDTRY to 5.25. Stop is set at 4.8650, which provides a risk-reward of 1:2.4 given inception at 4.9792."

Fundamentals

"Diplomatic tensions between US and Turkey over the house detention of Pastor Brunson is culminating in a set of US tensions on Turkey. The market will be watching the unfolding of the new diplomatic spat with great anxiety, which is likely to translate in a weaker lira and higher TRY rates."

Technicals

"We are in no technicals land as the pair has just broken the July 12 all-time high of 4.9743. A break above the psychological 5 mark would likely extend the selloff."

Risks to Our View

"Turkey and the US accommodate on a diplomatic level rapidly and the lira stabilizes. The CBRT reacts swiftly by hiking rates by no less than 150-200bps in the coming days."