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The USD weakened against a number of its counterparts yesterday, as the US CPI rates for July seem to have stabilised somewhat, at least for now, yet tend to remain at rather high levels. On the monetary front, Dallas Fed President Kaplan stated that in September the Fed should announce that it will start tapering its QE program and actually begin in October, while Kansas Fed President Esther George stated that it’s time to bring asset purchases to an end, and both statements were considered to be quite hawkish as both policymakers could affect the Fed’s stance in the upcoming Jackson Hole summit. USD traders today are expected to keep an eye out for the weekly initial jobless claims figure, while yet the main financial releases today may come from the UK and pound traders may keep a close eye on the release of UK’s GDP rates for June and Q2.
GBP/USD rose yesterday breaking the 1.3845 (S1) resistance line, now turned to support. Given that cable’s price action has broken the downward trendline guiding it since the 5th of August, we switch our bearish outlook for GBP/USD in favor of a sideways motion initially. Please note that the RSI indicator below our 4-hour chart runs along the reading of 50 and maybe implying a rather indecisive market. Should the bulls take over, we may see the pair aiming if not breaking the 1.3990 (R1) resistance line. Should the bears take over, we may see the pair breaking the 1.3845 (S1) support line and aim for the 1.3670 (S2) level.
Is CBRT to remain on hold?
Also today we get from Turkey CBRT’s interest rate decision. It should be noted that the TRY has been on the retreat against the USD in the past week and seems to have stabilised somewhat while Turkish President Erdogan called for a rate cut, exercising pressure on the CBRT. Inflation is accelerating, reaching very high levels, actually a two year high at +18.95% yoy and the CBRT should proceed with a rate hike. The bank may have reduced ammo to defend the value of its currency given that recent fires which raged in the country may adversely affect tourism one of the main industries in the Turkish economy making the situation even worse. Our base scenario is for the bank to remain on hold as the bank may delay any rate hikes, yet should the bank actually proceed with a rate cut as requested by President Erdogan, we may see the TRY weakening further. Also, in case the bank alters its hawkish view on its monetary policy forward guidance towards a more dovish tone, we may see TRY weakening.
After considerable weakening of the TRY in the past week, USD/TRY seems to have stabilised somewhat above the 8.5710 (S1) support line. We tend to maintain a bias for a sideways motion today, yet CBRT’s interest rate decision could alter the pair’s direction substantially. Please note that the RSI indicator below our 4-hour chart is slightly above the reading of 50 yet is not so convincing for the bull’s case, at least not yet. Should the pair find renewed buying interest, we may see USD/TRY aiming if not breaking the 8.7600 (R1) resistance line. Should sellers be in charge of the pair’s direction, we may see the pair breaking the 8.5710 (S1) support line and aim for the 8.3500 (S1) support level.
Other economic highlights today and the following Asian session:
Today during the European session, we get the UK’s GDP rates for June and Q2, as well as the manufacturing output growth rate for June among a slew of data. Also, in the European session, we get Eurozone’s industrial production growth rate for June and later on, from Turkey, we get CBRT’s interest rate decision. In the American session, we get from the US the weekly initial jobless claims figure and the PPI rate for July. During tomorrow’s Asian session, we get from New Zealand the manufacturing PMI for July. On the monetary front we note that RBA’s Jones and Kearns appear before Australian lawmakers.
Support: 1.3845 (S1), 1.3670 (S2), 1.3525 (S3)
Resistance: 1.3990 (R1), 1.4145 (R2), 1.4250 (R3)
USD/TRY H4 Chart
Support: 8.5710 (S1), 8.3500 (S2), 8.1600 (S3)
Resistance: 8.7600 (R1), 8.9500 (R2), 9.1500 (R3)
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JA 
