USD/TRY skates on thin ice around 18.00 ahead of CBRT Interest Rate Decision

• USD/TRY remains sidelined as traders await CBRT’s verdict.
• Sluggish US dollar, market’s inaction also restrict the pair’s moves.
• Turkish central bank is expected to keep rates steady at 14% despite record inflation.
• Second-tier US data, risk catalysts could also entertain traders.

USD/TRY treads water around 17.95, marking one more day of indecision below the 18.00 threshold heading into Thursday’s European session. The Turkish lira (TRY) pair’s latest inaction could be linked to the mixed plays surrounding the global economy and the nation’s ability to keep rates on hold despite witnessing record-high inflation.

It’s worth noting that the latest Reuters poll suggests inaction by the Central Bank of the Republic of Türkiye (CBRT). Turkey's central bank is expected to hold its policy rate unchanged at 14% for an eighth meeting next week, a Reuters poll showed on Friday, in the face of a global tightening cycle and rampant inflation at nearly 80% that shows no signs of falling.

On the other hand, the Minutes of the latest Federal Open Market Committee (FOMC) showed, per Reuters, that officials were ready to slow the pace of interest rate hikes in tandem with signals of a slowdown in inflation. The news also added, “In their July meeting minutes released on Wednesday, Fed officials said the pace of future rate hikes would depend on incoming economic data, as well as assessments of how the economy was adapting to the higher rates already approved.”

After the Fed Minutes’ release, the US 10-year Treasury yields retreated from the weekly top surrounding 2.90%, down two basis points (bp) to 2.89% by the press time.

Elsewhere, the latest jump in China’s covid numbers and the doubts over the People’s Bank of China’s (PBOC) capacity to tame recession woes also weigh on the market sentiment, which in turn underpin the US dollar’s haven demand.

Additionally, comments from the US Trade Representative’s office stating, “Early this autumn, the US and Taiwan will begin formal negotiations on a trade initiative,” seem to renew the fears of the US-China tussle and also roil the mood.

Looking forward, the CBRT verdict is less likely to impact the USD/TRY prices unless providing any surprises. Following that, the weekly prints of the US Initial Jobless Claims and Philadelphia Fed Manufacturing Survey for August could entertain the pair traders. Above all, recession fears and Fed concerns will be crucial to watch for fresh impulse.

Technical analysis

RSI (14) conditions hint that the buyers are running out of steam as they’ve been failing to cross the 18.00 hurdle. However, higher lows in recent days join bullish MACD signals to keep buyers hopeful until the quote stays beyond the monthly support line near 17.75.