Despite conflicting worries, USD/TRY continues to climb toward its all-time high. Prices are driven up by the Turkish inflation issue and CBRT’s opposition to rate increases. The purchasers are faced with slow rates and uncertainty over the Fed’s decision from December. Turkish CPI on Thursday and the FOMC meeting on Wednesday will be key indicators of short-term trends.
Bulls on the USD/TRY pair maintain control at the record high of 18.65, which was near 18.60 at the time of publication on Wednesday morning early in Europe. In doing so, the Turkish lira (TRY) pair fails to cheer the broad US dollar decline amid expectations of additional suffering for the TRY.
The main issue facing the TRY may be related to the Central Bank of the Republic of Turkey’s (CBRT) reluctance to raise the benchmark interest rates, even though the Turkish Consumer Price Index (CPI) just hit an all-time high of 83.45. The planned announcement on Thursday of October’s 85.6% inflation rate will likely set a new record high for the inflation rate.
It should be noted that the eighth consecutive monthly decline in Turkish manufacturing activity in October gives the USD/TRY pair further upside potential. On the same note, the US JOLTS Job Openings jumped to 10.717M in September, up from the forecasted 10.0M and the previously reported 10.28M readings. In addition, the US ISM Manufacturing PMI rose to 50.2 in October from 50.0 market expectations and 50.9 the month before. Similarly, the US S&P Global Manufacturing PMI final readings for October exceeded early estimates of 49.9 to 50.4 but remained below the 52.0 readings for the prior month.
In contrast, recent news from China has improved the market mood in the face of subdued US Treasury rates, which tested the USD/TRY bulls. Yi Gang, the governor of the People’s Bank of China (PBOC), recently went against the grain and said that the Chinese economy is still generally on track. The policymaker said, “We hope the housing market will have a smooth landing.” A China Banking and Insurance Regulatory Commission (CBIRC) representative also contributed to the uplift by stating that the real estate market is now “solid.”
The US 10-year Treasury rates are stuck at or around 4.05% as traders disagree on the US central bank’s next move in light of the 75 basis point rate rise and expectations for gradual rate increases beyond December. S&P 500 Futures reverse a two-day decline to post a 0.20% intraday upside at press time, reflecting the sentiment.
In conclusion, USD/TRY is still on the bull’s radar before important data or occurrences.
Technical Analysis
Although the 19.00 level limits the short-term USD/TRY upside, sellers are not present until there is an actual damaging breach of the support line that has held around 18.50 for a week.