USD/TRY: Bulls keep reins near $17.00 even as Turkey’s President Erdogan defends rate cuts

• USD/TRY stays firmer around record top during five- day uptrend.
• Turkey’s President Erdogan says economic problems are not due to lowering of rates.
• Omicron, US stimulus updates weigh on yields and DXY but no rescue for pair sellers.
• Risk catalysts are the key amid a light calendar.

USD/TRY prints 1.70% intraday gains while staying around record top, recently picking up bids to $16.80 during early Monday morning in Europe.

In doing so, the Turkish lira (TRY) pair shrugs of President Recep Tayyip Erdogan’s hawkish comments that defended the Central Bank of the Republic of Turkey (CBRT) rate cuts.

“President Tayyip Erdogan said he had lowered Turkey's inflation, currently above 21%, to around 4% before and that he will do it again soon,” said Reuters. “The new policy model based on low interest rates was part of an ‘economic independent war’,” adds Erdogan per the news.

While stepping forward in defense of the CBRT rate cuts, Erdogan said, per Reuters, “Recent problems in the economy were not caused by his push to lower interest rates, but rather by attacks on Turkey's economy.”

Reuters also said, “Speaking at an awards ceremony, Erdogan dismissed the idea of capital controls as ‘ridiculous’ and said Turkey would continue to operate within the free-market economy.”

Elsewhere, risk-off mood weighs on the stock futures in the West as well as the US Treasury yields. The main risk catalysts are the fears of the South African covid variant, dubbed as Omicron, joined by the US Democrats’ disappointment over stimulus and the Fed rate-hike calls.

Amid these plays, S&P 500 Futures drop 0.95% intraday whereas the US 10-year Treasury yields drop three basis points (bps) to 1.37%, down for the third consecutive day at the latest.

Although a light calendar and downbeat Treasury yields may test the USD/TRY bulls, the trend change is out of the question. For the short-term, risk catalysts are the key to follow for fresh impulse.

Technical analysis

Unless declining back below the previous resistance line from late November, around $15.20, USD/TRY bulls are on the way to $20.00 psychological magnet.