USD/TRY bulls approach yearly top near 18.30 with eyes on Turkish inflation

• USD/TRY grinds higher after refreshing two-week top the previous day, prints three-day uptrend.
• Fears of another bumper inflation figures keep buyers hopeful but US holidays, softer data test upside momentum.
• Turkish government expects easing inflation by late 2022, sharp fall in 2023.
• Turkish CPI for August is likely to refresh record top near 80.0%.

USD/TRY bulls brace for another positive day with eyes on the Turkish inflation data, mildly bid around 18.20 heading into Monday’s European session. In addition to the pre-data anxiety, the US holiday and mixed concerns over the Fed’s next move also probe the pair buyers of late.

Turkiye is up for releasing August month inflation numbers and the same becomes crucial after the latest increase in electricity and gas prices in the nation. Also highlighting the importance of the inflation data is the Central Bank of the Republic of Türkiye’s (CBRT) rate cut of 100 basis points (bps).

On Sunday, the Turkish government released an official update expecting the annual inflation rate to ease to 65% by the end of 2022, from nearly 80% in July and falling sharply to 24.9% by the end of 2023. The Reuters’ news also mentioned that the current account deficit was seen at $47.3 billion this year, up from $14.9 billion last year, dropping to $22 billion in 2023.

That said, the latest Reuters poll hints at the annual inflation figure exceeding 81% in August. “Polls show Turks believe inflation is far higher than official data,” said Reuters.

On the other hand, Friday’s mixed prints of the US employment data for August receded the hawkish Fed bets and allowed the US dollar to pare some gains amid a lackluster session due to the US Labor Day holiday. US employment data marked mixed readings as the headline Nonfarm Payrolls (NFP) rose past 300K forecast to 315K, versus 526K prior, but the Unemployment Rate rose to 3.7% compared to 3.5% expected and prior. Further details reveal that the Average Hourly Earnings reprinted 5.2% growth for August, a bit lesser than the 5.3% market consensus. Also, Factory Orders dropped to -1.0% for July compared to 0.2% forecasts and 1.8% in previous readings.

Even so, the USD/TRY buyers remain hopeful amid fears of economic slowdown.

Technical analysis

The lower high formation since late 2021 challenges USD/TRY bulls unless the quote renews the yearly top, currently around 18.28. The bears, however, should remain off the table until witnessing clear trading below the early August tops surrounding the 18.00.