USD/TRY stays firmer around 18.20 as Turkiye hikes electricity, gas prices

• USD/TRY picks up bids to reverse the previous day pullback from weekly top.
• Turkish authorities raise prices of electricity, gas even as inflation runs hot.
• Hawkish Fed bets, risk-off mood also underpin the bullish bias.
• Key US data eyed for fresh impulse, risk catalysts are important too.

USD/TRY regains upside momentum, after posting the first daily loss in seven, as it picks up bids to 18.20 heading into Thursday’s European session. In doing so, the Turkish lira (TRY) pair justifies the market’s broad US dollar favor and the energy price increase at home.

“Turkish authorities hiked electricity and natural gas prices for households by around 20% and by around 50% for industry on Thursday,” said Reuters. The news also mentioned that the price hike puts further upside pressure on inflation, which was running at nearly 80% in July.

On the other hand, strong yields propel the US Dollar Index (DXY) amid increasingly hawkish Fed bets. That said, the CME’s FedWatch Tool portrays 74.0% chance of a 75 basis points Fed rate hike in September, versus 73.0% the previous day.

The US 10-year Treasury yields refresh a two-month high of around 3.21% while the two-year bond coupons jump to the highest levels since 2007, near 3.20% and 3.50% respectively at the latest. Also portraying the sour sentiment is the S&P 500 Futures’ 0.56% intraday fall to the lowest levels since late July, at 3,930 by the press time.

Also contributing to the DXY’s run-up is the risk-off mood. While portraying the sentiment, shares in the Asia-Pacific bloc grind lower while S&P 500 Futures drop half a percent at the latest. The reason could be linked to the central bankers’ aggression despite economic slowdown fears and grim covid conditions in China. Furthermore, the US-China tussles over Taiwan and softer China Caixin Manufacturing PMI are extra positives for the USD/TRY.

Looking forward, the US ISM Manufacturing PMI for August, expected 52.8 versus 52.0 prior, ahead of Friday’s US Nonfarm Payrolls (NFP). Also important will be the moves of the Treasury bond yields, as well as headlines surrounding China.

Also read: US ISM Manufacturing PMI Preview: Slowing growth or recession?

Technical analysis

A one-week-old horizontal resistance around 18.25 appears to restrict the short-term USD/TRY upside ahead of 2021 peak surrounding 18.35. Meanwhile, the RSI signals that the buyers are running out of steam, which in turn highlights the monthly horizontal support near 18.00 as the key downside level to welcome the bears.