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US Stock Futures Look to Test Week's Lows Ahead of NY Open

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  • USD/TRY trades +1.38% higher this morning as weak sentiment continues to weigh on the lira following last week's larger than expected rate cut.
  • W/w the cross trades +5.19% higher - untethered as a result of the recent CBRT dovish tilt directly into oncoming CPI headwinds.
  • With markets still projecting more key rate cuts into the 14.00-15.00% zone by year-end, most analysts are still seeing more weakness to come for TRY with targets in the 10.20-10.50 range in USD/TRY.
  • The concern from here is a reversion to unconventional monpol tools, such as curtailing off-shore TRY liquidity and the depletion of FX reserves to defend the currency.
  • Looking ahead, we still expect another cut in the 100bp+ range going into year-end, despite the recent dovish tilt negating most of the positive impact of more favourable base effects in November.
  • Beyond Turkey's CBRT woes, the expulsion of US diplomats is also a concern worth noting and will weigh further on bilateral relations.
  • For the remainder of the week we look to trade balance, and PMI Data for clues on the recovery trajectory. The overall bias in USDTRY remains bullish following the large gap higher this morning.
  • While there may be some selling pressure to close the gap in the near-term, the cross looks set to challenge 10.00 and above in the coming sessions.
  • Intraday Sup1: 9.7121, Sup2: 9.6625, Res1: 9.85, Res2: 9.90