• USD/TRY is advancing around a seven-day high after rising the most in a month the previous day.
  • Record inflation in Turkey joins macro fears of a global economic slowdown to propel the pair.
  • Important for the day will be the FOMC minutes, the US services ISM PMI for June.

USD/TRY remains in center stage around the 17.03 intraday high as bulls hold the reins amid inflation/recession fears ahead of Wednesday’s European session.

The Turkish Lira (TRY) pair jumped the most in a month yesterday after fears of an economic slowdown joined Turkey’s runaway inflation. Turkey released another bumper inflation figure on Monday as the consumer price index (CPI) rose to 78.62% in June from an expected 78.35% and 73.5% previously.

It should be noted that the Turkish Treasury took multiple actions related to money market operations to defend the TRY, but failed.

On a broader front, pessimism surrounding the global supply chain amid escalating standoffs between Russia and Ukraine joins fears of new covid-induced lockdowns in China to amplify recession risks . The risky mood intensified after Germany and Italy issued economic warnings, while the Bank of England (BOE) also released a report highlighting the gloomy economic outlook.

Elsewhere, comments from Chinese Vice Foreign Minister Ma Zhaoxu suggesting that China is willing to strengthen strategic coordination with Russia also weighed on AUD/USD prices due to the pair’s risk barometer status. . The reason may have to do with fears that Beijing’s support for Moscow could only deepen the Russia-Ukraine crisis and put more downward pressure on the global supply chain, which in turn has intensified the woes of recession.

Additionally, hawkish bets on major central banks’ upcoming moves and upbeat US data are also bolstering the risk-averse mood, which in turn is supporting safe-haven demand for the US Dollar and propelling USD/TRY prices. On Tuesday, US factory orders for May came in at 1.6% MoM vs. 0.5% expected and revised up 0.7% from the previous reading.

Following that, today’s Federal Open Market Committee (FOMC) minutes and the US ISM services PMI for June, expected at 54.5 vs. 55.9 previously, will offer further guidance.

Technical analysis

The rebound in USD/TRY is approaching the previous May support line as of 5:30 p.m. PRESS TIME. It should be noted that an ascending trend line from Dec 2021 around 16.75 looks like a tough nut to crack for the bears.