USD/TRY: Struggles to defend Turkish Lira bears, focus on CBRT, Fed Powell’s Testimony

• USD/TRY remains indecisive, grinding near the record high marked the last week.
• Turkish Lira buyers brace for strong hawkish CBRT move, markets expect heavy rate increase to the tune of near 20%.
• Fed stays on course to announce July rate hike, Powell’s speech will be crucial to watch.
• Full markets’ return may entertain intraday traders but lack of volatility is expected ahead of the key Thursday.

USD/TRY fade bullish bias as it seesaws around 23.60 heading into Tuesday’s European session. In doing so, the Turkish Lira (TRY) pair fails to refresh the all-time high mark in the last week as traders fear a bearish surprise for the pair.

That said, the fresh appointment of Hafize Gaye Erkan as the new Governor of the CBRT and former economy chief M. Simsek as the new Finance Minister, as well as Turkish President Recep Tayyip Erdogan’s readiness to relinquish rate controls, allow CBRT hawks to remain hopeful.

It’s worth noting that chatters of witnessing a CBRT rate hike to 20%, from the current 8.5%, gain major attention and prod the USD/TRY traders. That said, Reuters quotes JP Morgan’s report suggesting the Turkish central bank’s rate lift to 25%.

Apart from the CBRT moves, Fed Chair Jerome Powell’s bi-annual Testimony will also be important to watch for the USD/TRY moves.

While the CBRT is likely to offer a wild move on Thursday, Fed Chair Powell’s Testimony and second-tier US/Turkish data will entertain the traders ahead of that. That said, a strong rate hike from the Central Bank of the Republic of Türkiye (CBRT) could trigger a downside break of the 23.00 key support, which in turn will challenge the previous all-time high of around 21.00.

Additionally, the inflation pressure is much high in Turkiye than in the US and hence the odds of witnessing a heavy rate hike from the CBRT, as well as the USD/TRY’s slump, can’t be ruled out.

Technical analysis

USD/TRY bulls fade upside momentum amid easing bullish MACD signals and overbought RSI conditions. The Turkish Lira pair sellers, however, need validation from 23.10 and CBRT to convince bears.