• USD/TRY grinds higher around yearly top, mildly bid of late.
• Inflation woes are stronger in Turkey as CBRT resists rate hike.
• Sluggish session, light calendar limit immediate moves ahead of US CPI.

USD/TRY stays mildly bullish around the intraday high of 17.96 heading into Tuesday’s European session. In doing so, the Turkish lira (TRY) pair remains firmer for the second consecutive day after losing heavily on Friday, as traders brace for Wednesday’s US Consumer Price Index (CPI).

It should be noted, however, that the market’s cautious mood ahead of the key data and a light calendar, restricts the USD/TRY moves of late.

That said, the US 10-year Treasury yields remain inactive at around 2.76%, following nearly seven basis points (bps) of the downside on Monday and a 14-bps run-up on Friday.

With this, the US Dollar Index (DXY) remains inactive near the intraday low surrounding 106.32 ahead of the US Nonfarm Productivity and Unit Labor Costs for the second quarter (Q2). Forecasts suggest that the US Nonfarm Productivity could improve to -4.6% from -7.3% prior while Unit Labor Costs may ease to 9.5% versus 12.6% in previous readings.

However, the comparatively less rate action by the Central Bank of the Republic of Türkiye (CBRT) versus the Fed keeps the USD/TRY bulls hopeful. Hence, the latest Fed fund futures price is nearly 70% odds of another 75 bps rate hike in September. On the other hand, Turkish President Tayyip Erdogan’s preference for no rate hikes appears to keep CBRT adhered to more qualitative means of taming the record inflation, which in turn keeps USD/TRY buyers hopeful.

Technical analysis

An ascending triangle bearish formation joins overbought RSI conditions to tease USD/TRY bears. However, the successful break of $17.875 appears necessary for the bears to retake control. In absence of which the stated triangle’s resistance line near 18.05 could test the bulls ahead of directing them to the late 2021 peak near 18.35.