• The Turkish lira dropped more than 5 percent on Wednesday against the USD and forced the CBT to hike rates by 300 basis points reaching 16.5%. The central bank acted after about three weeks continuous depreciation of the Turkish Lira against the USD. Erdogan, who earlier intended to practically take over the country’s monetary policy, pledged allegiance to global principles of monetary policy in a televised address yesterday. Analysts consider the 300 bp rate hike as the minimum and expect further rate hikes as consumer inflation accelerates. Should there be further headlines about rate hikes from he CBT we could see the Turkish Lira strengthening.

• USD/TRY rose yesterday breaking the 4.8000 (R2) resistance level and tested the 4.9200 (R3) resistance hurdle. The pair relented any gains it made and continued trading at lower levels than when the day started. We see the case for the pair to trade in a sideways manner today with some bullish tendencies. The pair could prove sensitive to fundamentals as new headlines reel in. Should the pair find fresh buying orders along its path we could see the pair breaking the 4.6600 (R1) resistance level. Should it come under selling interest, the pair could break the 4.4850 (S1) support line and aim for the 4.3600 (S2) support barrier.

Trump wants a new structure for US-China trade deal

• President Trump said yesterday that any US-China trade deal would require “a different structure”, refuelling uncertainty. The statement was made as negotiations are already under way, raising fears about reigniting a trade war. The trade talks seem to be clouded by the negotiations for North Korea’s nuclear arsenal, where China is North Korea’s only ally. Should there be more headlines about further uncertainty in the US-Sino trade talks we could see safe havens strengthening.

• USD/JPY dropped heavily yesterday, breaking the 110.45 (R2) support line and the 109.76 (R1) support line (now turned to resistance). Please note that the pair continued to drop despite the correction it had during the mid of the European session. We see the case for the pair to continue to trade in a bears market as the uncertainty of the US-Sino trade relationship continues. Technically, it should be noted that the pair broke the upward trend-line incepted since the 26th of March and hence we remove our bullish bias for the pair’s direction. Should the bears continue to be in charge, the pair could break the 108.95 (S1) support line and aim for the 108.53 (S2) support barrier. Should the bulls take over, we could see the pair breaking the 109.76 (R1) resistance line and aim for the 110.45 (R2) resistance zone.

In today’s other economic highlights:

In the European session we get Germany’s GDP growth rate for Quarter 1 and GfK Consumer Confidence indicator for June. From the UK the retail sales growth rate for April will be released. In the American session we get the existing home sales figure for April. As for speakers, BoE Governor Mark Carney, New York Fed president William Dudley, ECB’s Peter Praet, FOMC member Raphael Bostic, Dallas Fed President Kaplan and FOMC member Patrick Harker speak. Also please be advised that ECB’s Account of Monetary meeting minutes will be released.

USD/TRY

• Support: 4.4850 (S1), 4.3600 (S2), 4.2200 (S3)

• Resistance: 4.6600 (R1), 4.8000 (R2), 4.9200 (R3)

USD/JPY

• Support: 108.95(S1), 108.53 (S2), 107.80 (S3)

• Resistance: 109.76 (R1), 110.45 (R2), 110.95 (R3)