• USD/TRY pauses three-day uptrend but bears appear cautious.
• Turkish government proposes a 1 trillion lira supplementary budget in parliament.
• US dollar pullback, and risk-on mood exert additional downside pressure.

USD/TRY dribbles around 17.32 as the pair traders fail to benefit from the Turkish government’s budget proposal amid a sluggish session during early Tuesday morning in Europe.

“Turkey's government has submitted a proposal to parliament for a supplementary budget of some 1 trillion lira ($57.74 billion) to cover rising costs of tackling a currency slide, soaring energy prices and rampant inflation, the state-run Anadolu news agency said on Monday,” per Reuters.

The news also mentioned that the proposal will have to be passed first by a commission in parliament and later by the general assembly. Parliament usually breaks from early July to early October.

Despite the hopes of stimulus, the USD/TRY remains on the front foot around the yearly high, despite the latest pause after the three-day uptrend, mainly on President Tayyip Erdogan’s push for no rate hikes despite record-high inflation.

While failing to cheer the stimulus hopes, the USD/TRY also ignores a pullback in the US dollar, as well as firmer market sentiment.

US Dollar Index (DXY) extends the week-start losses to 104.41, down 0.07% intraday by the press time, which in turn allows the commodities and Antipodeans to cheer the risk-on mood. The greenback’s weakness could be linked to the recently downbeat US data and softer US inflation expectations, as per the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data. It’s worth noting that the US inflation expectations refreshed monthly low on Friday.

Amid these plays, the S&P 500 Futures rise around 1.6%, up for the second consecutive day, as it flashes the 3,735 level at the latest. On the same line, the US 10-year Treasury yields extend Friday’s gains to begin the week’s trading around 3.3%, up four basis points (bps) by the press time.

Moving on, USD/TRY traders will pay attention to the risk catalysts and the Chicago Fed National Activity Index and the US Existing Home Sales for May. However, major attention will be on Fed Chair Jerome Powell’s Testimony on the bi-annual Monetary Policy Report.

Technical analysis

A clear downside of the six-week-old ascending trend line, around 17.40 by the press time, favors the USD/TRY pullback towards the early June peak near 17.20 before directing the bears towards the 17.00.