USD/TRY bulls poke 17.00 on inflation/recession woes ahead of Fed Minutes

• USD/TRY grinds higher around seven-day top after rising the most in a month the previous day.
• Record inflation in Turkiye joins macro fears of global economic slowdown to propel the pair.
• FOMC Minutes, US ISM Services PMI for June will be important for the day.

USD/TRY remains on the front foot around the intraday high of 17.03 as buyers keep reins amid inflation/recession fears ahead of Wednesday’s European session.

The Turkish lira (TRY) pair jumped the most in a month the previous day after fears of economic slowdown joined Turkiye’s hot inflation. Turkiye released another bumper inflation number on Monday as the headline Consumer Price Index (CPI) rose to 78.62% for June, versus 78.35% expected and 73.5% prior.

It’s worth noting that the Turkish Treasury undertook multiple actions linked to monetary market operations to defend the TRY, but failed.

On a broader front, pessimism surrounding the global supply chain amid the escalation in the Russia-Ukraine tussles joins fears of fresh covid-led lockdowns in China to amplify recession risks. The risk-off mood intensified after Germany and Italy flashed economic warnings while the Bank of England (BOE) also released a report conveying the grim economic outlook.

Elsewhere, comments from Chinese Vice Foreign Minister Ma Zhaoxu, suggesting that China is willing to strengthen strategic coordination with Russia, also weighed on the AUD/USD prices due to the pair’s risk barometer status. The reason could be linked to the fears that Beijing’s support to Moscow could only escalate the Russia-Ukraine crisis and exert more downside pressure on the global supply chain, which in turn intensified the recession woes.

Furthermore, hawkish bets on the major central banks’ next moves and upbeat US data also propel the risk-off mood, which in turn underpin the US dollar’s safe-haven demand and propel the USD/TRY prices. On Tuesday, the US Factory Orders for May, to 1.6% MoM versus 0.5% expected and upwardly revised 0.7% previous readings.

Moving on, today’s Federal Open Market Committee (FOMC) Minutes and the US ISM Services PMI for June, expected 54.5 versus 55.9 prior, will offer additional directions.

Technical analysis

USD/TRY rebound approaches the previous support line from May, at 17.30 by the press time. It’s worth noting that an ascending trend line from December 2021, around 16.75, appears a tough nut to crack for the bears.