USD/TRY struggles around record high past 18.30 as bulls await Fed, CBRT

• USD/TRY bulls catch a breather after two-day uptrend.
• Turkish President Erdogan talks down threats emanating from inflation, suggesting longer period of CBRT inaction.
• Hawkish Fed bets, yields keep DXY on the front foot ahead of the FOMC.

USD/TRY pauses a two-day bull-run as it dribbles around 18.30 heading into Wednesday’s European session. In doing so, the Turkish lira (TRY) pair seesaws near the all-time high marked the previous day as traders await the key central bank decisions.

Among them, today’s Federal Open Market Committee (FOMC) Monetary Policy Meeting gains major attention after the recently hawkish Fed bets that tease 1.0% rate hike concerns. That said, the Fed’s 75 basis points (bps) rate hike bore 83% chance whereas nearly 17% odds are favoring a full 1.0% rate lift. Nouriel Roubini, a well-known global economist, joined the league of Fed hawks to favor such a strong rate hike on Tuesday.

At home, Turkish President Tayyip Erdogan said on Tuesday that inflation is not an "insurmountable economic threat," per Reuters. The news also quotes the Turkish leader as saying that inflation will begin to fall at the end of the year after it surged to more than 80% in August.

Comments Turkish President Erdogan confirms the latest neutral bias over the Central Bank of the Republic of Türkiye’s (CBRT) next move. The Turkish central bank has refrained from any rate moves even if the inflation refreshed the record high recently. On the contrary, the policymakers have adhered to qualitative moves that curb the money flow into the system to keep the tab on the price rise.

Amid these plays, the US 2-year Treasury yields jumped to the highest level in 15 years while the 10-year counterpart also rose to the 11-year top on Tuesday. For now, the S&P 500 Futures lick its wounds near 3,880 after declining the most in one week the previous day whereas the US benchmark Treasury bond yields retreat from the multi-day high.

Looking forward, USD/TRY is likely to remain firmer as a wide difference between the monetary policies of the Fed and the CBRT. An intraday pullback, however, can’t be ruled out if the FOMC announcements disappoint the US dollar bulls.

Technical analysis

An upward slopping resistance line from June, near 18.55 by the press time, lures USD/TRY bulls unless the prices break a six-week-old support line surrounding 18.25.