USD/TRY stays defensive around 14-day high near 17.50 as Fitch cuts Turkish credit rating

• USD/TRY struggles for clear direction after rising for eight consecutive days.
• Fitch cuts Turkiye’s debt rating to "B" from "B+" citing inflation, economic concerns.
• US inflation expectations fuel the latest round of advances, US CPI, risk catalysts will be important moving forward.

USD/TRY grinds higher around 17.35 as bulls seek fresh clues during early Tuesday morning in Europe. Even so, pessimism surrounding Turkiye’s economic outlook keeps the pair buyers hopeful.

TRY slipped 0.4% after rating agency Fitch downgraded the country's debt rating to "B" from "B+" on Friday, citing rising inflation and economic concerns, per Reuters.

It’s worth noting Turkish Consumer Price Index (CPI) jumped to a record high of around 39.0% during June. Even so, Turkish President Recep Tayyip Erdogan insists on lower rates and rather pushes the central bank towards qualitative measures which have been ineffective of late.

On the other hand, a record high print of the US one-year inflation expectations, as per the NY Fed’s survey of one-year-ahead consumer inflation expectations, join chatters surrounding economic slowdown to fuel the USD/TRY prices. That said, the NY Fed’s inflation precursor jumped to 6.8% in June, versus 6.6% prior.

Elsewhere, talks between Russia and Turkiye appear to have solved the riddle surrounding grain exports, which in turn may help ease some pressure off the markets. However, nothing concrete is out on the wires and hence the USD/TRY bulls keep reins.

That said, the pair traders should watch for risk catalysts for fresh impulse ahead of Wednesday’s US Consumer Price Index (CPI) for June, expected 8.8% versus 8.6% prior.

Technical analysis

Despite the USD/TRY pair’s latest inaction around a two-week top, the quote’s daily closing above a downward sloping resistance line from June 09, now support around 17.33, keeps the bulls hopeful to refresh yearly low, around 17.50 at the latest.