USD/TRY bulls flex muscles around 18.00 with eyes on Turkish inflation, US PMI

• USD/TRY struggles to extend latest recovery, sidelined of late.
• Fears of record inflation keeps pair buyers hopeful as CBRT refrains from rate hike.
• Receding risk aversion on China’s upbeat PMI seems to challenge bulls.
• Updates concerning Taiwan, Fedspeak and US Factory Orders for July are also important for fresh impulse.

USD/TRY remains steady around 17.95, fading the previous day’s run-up heading into Wednesday’s European session. In doing so, the Turkish lira (TRY) pair portrays the markets’ cautious mood ahead of the key data from the US and Turkiye.

It’s worth noting that the fears of witnessing another bumper inflation number from Turkiye battle with the US dollar’s failure to extend the recovery moves from a monthly low to confuse USD/TRY traders.

On Wednesday, Central Bank of the Republic of Türkiye’s (CBRT) Governor Sahap Kavcioglu defended the Turkish central bank's loan policies at a meeting with a business group on Tuesday, repeating that recent measures create favorable conditions for exporters to increase production, per Reuters.  The news also mentioned, “Speaking to the Union of Chambers and Commodity Exchanges of Turkey (TOBB), Kavcioglu said the central bank had partially succeeded in efforts for targeted loans to reach the right companies. He also appeared to dismiss criticism that companies cannot access affordable financing.”

It is widely known that the CBRT has been reluctant to increase the rate hike despite the record inflation and has rather concentrated on qualitative measures which have failed to tame the woes of late. Alternatively, the Fed policymakers have flashed mixed signals while keeping the 0.50% rate hike for September on the table.

On the other hand, the US-China tussles over Taiwan have been challenging the risk appetite but the recently firmer prints of China’s Caixin Services PMI for July appeared to have challenged the USD/TRY buyers. That said, the private services gauge from the dragon nation rose to 55.5 versus 48 expected and 54.5 prior. While portraying the mood, S&P 500 Futures rise 0.25% intraday while the US 10-year Treasury yields drop three basis points (bps) to 2.71% at the latest.

Moving on, the Turkish Consumer Price Index (CPI) for July, expected 80.5% YoY versus 78.62% prior, will be crucial for the USD/TRY traders. Following that, the US Factory Orders for June and ISM Services PMI for July will join the US-China jitters and recession talks to direct the pair moves.

Technical analysis

The higher-low formation joins a successful rebound from the 10-DMA, around 17.85 by the press time, to keep USD/TRY bulls hopeful of refreshing the record high marked in 2021 at around 18.35.