USD/TRY: Turkish Lira braces for a rollercoaster week near 23.60 as CBRT hawks flex muscles

• USD/TRY remains on the front foot at its grinds near all-time high, stays within weekly trading range.
• Higher hopes from CBRT hawks, mixed US data keep Turkish Lira buyers hopeful.
• Turkish President Erdogan may not allow the rates to rise too much, can disappoint markets.
• Fed Chair Jerome Powell’s Testimony, PMIs also become important for clear directions.

USD/TRY bulls keep the reins around 23.61 as they prepare for the key week comprising the all-important Central Bank of the Republic of Türkiye (CBRT) monetary policy meeting. Apart from the pre-CBRT anxiety, holiday in the US and a light calendar elsewhere also restrict the quote’s immediate moves.

The Turkish Lira (TRY) pair previously renewed its record top near 23.70 before marking a sidelined performance in the last week. While tracing the moves, the broad US Dollar weakness and hopes of a solid hawkish action from the CBRT can be traced.

The positioning of the recent appointment of Hafize Gaye Erkan as the new Governor of the CBRT and former economy chief M. Simsek as the new Finance Minister join the previous week’s comments from Turkish President Recep Tayyip Erdogan to prod the USD/TRY bulls.

“Erdoğan said this week that while he had not changed his mind on the unorthodox view that high interest rates caused rather than cured inflation, he would allow Erkan and Şimşek to take steps to bring inflation to single digits from the current level close 40%,” reported the Financial Times (FT).

On the other hand, US Dollar Index (DXY) extends the previous day’s corrective bounce off the monthly low amid slightly downbeat sentiment and the hawkish Fed signals, while also ignoring the mixed US data flashed the previous day. With this, the greenback’s gauge versus the six major currency pair sticks to minor gains of around 102.30.

It should be noted that the chatters of witnessing a CBRT rate hike to 20%, from the current 8.5%, gain major attention and prod the USD/TRY traders. That said, Reuters quotes JP Morgan’s report suggesting the Turkish central bank’s rate lift to 25%.

Hence, the USD/TRY is aptly portraying the market’s cautious mood ahead of the CBRT Interest Rate Decision amid the US holiday. Also important to watch will be Fed Chairman Powell’s bi-annual testimony, as well as PMIs for June.

Technical analysis

USD/TRY remains within a weekly trading range between 23.40 and 23.68 amid overbought RSI (14) and easing bullish bias of the MACD, which in turn suggest correction in the Turkish Lira prices.