USD/TRY snaps two-day losing streak near 27.00, braces for Fed after CBRT showdown

• USD/TRY picks up bids to renew intraday high after declining in the last two consecutive days.
• CBRT lifts interest rates to 17.5% from 15.0%, versus 20.0% expected.
• Fed’s 0.25% bps rate hike is already given, policy pivot signals past July will be eyed for clear directions.
• Economic hardships for Turkiye keep Lira on the back foot despite likely future divergence between Fed and CBRT.

USD/TRY regains upside momentum after declining in the last two consecutive days, up 0.65% intraday near 26.95 amid the early hours of Friday’s European session. In doing so, the Turkish Lira (TRY) pair convey the market’s disappointment with the Central Bank of the Republic of Türkiye (CBRT) while bracing for the next week’s Federal Reserve (Fed) rate hike.

That said, the CBRT hesitated in matching the market’s hawkish expectation as it lifted the benchmark interest rates to 17.5% from 15.0%, compared to 20.0%. This becomes the second instance when the Turkish central bank disappoints the TRY bulls.

Apart from the CBRT-inflicted losses for the Turkish Lira, the looming economic crisis for the nation, after witnessing multiple hurdles like record-high inflation and geopolitical events that shook the economy, also weigh on the TRY price and propel the USD/TRY pair.

On the other hand, the US Dollar Index (DXY) jumped the most in a month to refresh the weekly top the previous day before recently retreating to 100.80. In doing so, the greenback’s gauge versus the six major currencies portrays the market’s positioning for the Fed’s widely anticipated 0.25% rate hike after cheering mostly upbeat US job clues. That said, US Initial Jobless Claims dropped to 228K for the week ended on July 14, the lowest since May, versus 237K prior and 242K market forecasts.

Elsewhere, China tried to impress markets with multiple moves to defend the world’s second-largest economy’s growth. That said, the Wall Street benchmark closed in the red amid the downbeat performance of energy and technology shares but the S&P500 Futures remain indecisive after reversing from the yearly high. Further, the US Treasury bond yields refreshed their weekly highs the previous day and propelled the US Dollar before the latest retreat.

Looking ahead, a light calendar may restrict immediate USD/TRY moves before the next week’s monetary policy meetings of the Fed. It should be observed that the risk catalysts may entertain the traders.

Technical analysis

A rising wedge bearish chart formation on the daily chart, currently between 26.50 and 27.30, teases the USD/TRY bears ahead of the key week comprising the Federal Open Market Committee (FOMC) monetary policy meeting announcements.