Consolidation is likely to precede fresh rally; Turkey’s inflation data could be a trigger

The USDTRY pair holds within tight range on Wednesday after bounce from correction low of recent strong rally at 5.6875, showed signs of stall.
Lira showed mild reaction on recent news from the US as Turkish markets are closed for holidays, but maintains bearish tone and seeing risk of further weakness.
Profit-taking of recent strong fall, when lira hit new record low against the dollar at 7.1074, pushed the pair’s price lower, but move could be seen as correction ahead of fresh rally.
Weak fundamentals, with inflation in Turkey at 14-year high, require adequate reaction from the central bank.
The CBRT so far failed to follow up and increase interest rates accordingly, keeping the local currency under increased pressure.
Turkey’s inflation data, due on Sep 3, are the top event, as lira fell around 20% after previous release in early August.
If consumer prices show further increase, which is very likely and the central bank fails to act accordingly, further sell-off of lira could be likely scenario.
Meanwhile, the pair may take an extended breather, with limited dips expected to precede fresh rally.
Break above recent record high at 7.1074 could drive the price towards Fibo projection at 7.4425 and to psychological 7.50 barrier in extension.

Res: 6.1589; 6.3430; 6.4796; 6.5716
Sup: 5.9971; 5.9209; 5.7493; 5.6875