USD/TRY eyes fresh record high above 20.00 as Erdogan again wins Turkish Presidential election

• USD/TRY picks up bids to refresh all-time high, reverses Friday’s corrective pullback.
• Erdogan marks more than two decades of leadership with the latest election win.
• Uncertainty about US debt ceiling extension deal also weighs on Turkish Lira.
• Risk catalysts, US NFP eyed for clear directions.

USD/TRY remains mildly bid near the 20.00 psychological magnet on early Monday, adjacent to the all-time high of 20.80 marked the previous day, as the Turkish Lira (TRY) sellers cheer Recep Tayyip Erdogan’s victory in the country's presidential election on Sunday.

As Erdogan advocates for easy rates, his dominance in the nation for more than two decades could allow the TRY bears to keep the reins amid hopes of less-costly funds despite higher inflation.

Official results showed, per Reuters, that Erdogan’s challenger Kemal Kilicdaroglu got 47.9% of the votes while the winner acquires 52.1% of the votes, pointing to a deeply divided nation. In his victory speech, Erdogan acknowledged per Reuters that inflation was the most urgent issue, but said it would also fall, following the central bank's policy rate that was cut to 8.5% from 19% two years ago.

On the other hand, the passage of the US debt ceiling deal to avoid the default prods the US Dollar bulls, as well as the USD/TRY buyers. However, the deal lacks support from some of the extreme leftists and rightists due to the compromise each party had to do to reach the agreement. As a result, the market’s optimism from the deal fades ahead of the key voting on the matter during the week.

Elsewhere, upbeat US data and comments from the International Monetary Fund Managing (IMF) Director Kristalina Georgieva, as well as some of the Federal Reserve (Fed) officials, also favor the USD/TRY bulls.

In the last week, US PMIs, the second estimate of the first quarter (Q1) 2023 Gross Domestic Product (GDP), Durable Goods Orders and the Core Personal Consumption Expenditure (PCE) Price Index for the said month, known as the Fed’s preferred inflation gauge, marked upbeat details in their latest readings.

Against this backdrop, the market sentiment remains mildly positive and helps the AUD/USD to grind higher. With this, Wall Street closed on a positive note while S&P500 Futures print mild gains as it cheers the US debt ceiling deal whereas the holidays in major bourses restrict the bond market moves of late.

Looking ahead, Turkish Quarterly Gross Domestic Product (GDP) and the US jobs report for May will be the key data to watch for the USD/TRY traders. However, major attention will be given to the US Congress voting on the debt ceiling deal.

Technical analysis

Although the overbought RSI conditions challenge the USD/TRY bulls, the pair’s bearish bias remains off the table unless it provides a sustained downside break of the previous resistance line from March, around 19.75 by the press time.