USD/TRY prods two-day uptrend near 26.00 on mixed Turkish inflation signals, focus on US employment, PMI clues

• USD/TRY fades latest run-up amid pre-data consolidation, edges lower around intraday bottom of late.
• Turkish inflation catalysts like CPI and PPI came in softer on YoY for June but PPI MoM jumped.
• Hawkish Fed Minutes, risk-off mood propel US Dollar and put a floor under Turkish Lira price.
• US ADP Employment Change, ISM Services PMI eyed for clear directions.

USD/TRY clings to mild losses around 26.05 heading into Thursday’s European session. In doing so, the Turkish Lira (TRY) pair ignores the broad US Dollar gains while printing the first daily loss, so far, in three.

While tracing the catalysts, receding fears of worrisome inflation leading to the economic debacle in Turkiye seem to allow the TRY to lick its wounds of late. On Wednesday, Turkish Consumer Price Index (CPI) and Producer Price Index (PPI) for June eased to 38.21% and 40.42% on a yearly basis versus 39.59% and 40.76% respectively priors. Notably, the PPI MoM jumped to 6.5% from 0.65% prior.

Late in June, the Central Bank of the Republic of Türkiye (CBRT) hiked rates for the first time since August 2021, to 15% from 8.5% versus the 21% market forecasts. Together with the Interest Rate Decision, the CBRT also reiterated its commitment to the 5% inflation target and did not rule out additional monetary tightening measures to achieve this target. The same initially drowned the TRY but it appears that the move was rightly taken after the previous day’s softer inflation data.

On the other hand, downbeat US Factory Orders failed to push back the market’s hawkish Fed bets surrounding a 0.25% rate hike in July, which in turn joins the broad risk-off mood to fuel the US Dollar and put a floor under the USD/TRY price.

That said, a jump in Chinese investor buying Hong Kong and Macau wealth products join pessimism about China’s top-tier housing players like Shimao Group, as well as the government-backed Sino-Ocean Group, to amplify economic fears about the world’s biggest industrial player China. Additionally, tit-for-tat trade war measures by the US and China join the

While portraying the mood, S&P500 Futures dropped for the third consecutive day to 4,4712, down 0.30% intraday, whereas the US 10-year and two-year Treasury bond yields jump to a fresh three-month high of around 3.96% and 4.97% in that order.

Moving on, today’s US ISM Services PMI and ADP Employment Change for June, as well as China headlines and recession woes, will be crucial for clear market directions.

Technical analysis

USD/TRY sellers should wait for a clear downside break of the weekly low of around 25.82 for fresh short positions. That said, the 5-DMA level of around 25.97 restricts immediate downside of the Turkish Lira pair. Alternatively, the all-time high around 26.08 appears to be the buyer’s favorite entry-point for portraying a gradual rise towards the 30.00 psychological magnet.