Long Turkish Lira After Interest Rate Hike
The Fundamentals:
Recently the Turkish Lira has been taking a beating in part to President Recep Tayipp Erdogan saying he would take more control of monetary policy if he wins the June 24th election. In an effort to stymie the Lira's depreciation, last Wednesday the Turkish Central bank raised the lending rate from 13.5% to 16.5%. As a result, I attached a call-out box on the chart showing a large green candle that day. The Lira bottomed at about 0.203 dollars on Wednesday before rallying off of lows.
The Technicals:
This price bottom is also very close to 3 standard deviations from the 200 day moving average. Rolling support and resistance lines are drawn on the chart which are being created by my "Fibonnacci Bollinger Bands Script". Because we are still in a strong downtrend, without other catalysts, I don't anticipate a move back up to the long term resistance line for the downward channel that the Lira appears to be stuck in (Zoom out on the chart to view the long term channel, its more obvious that way). Be that as it may, in the short run, there may be an opportunity to profit off of renewed optimism for the Turkish Lira, at least in part until the June 24th election. Momentum analysis using my "Smart RSI" indicator shows during the strong sell off following Erdogan's comments unleashed an extended period of bearishness that occurred less than 5% of the time over the last 365 days. The RSI's move out of this oversold territory suggests that the bear's have become exhausted, at least temporarily.
The Trade:
It is my current belief that the price will continue to rise to the 61.8% retracement line using my FBB indicator, and if that level is broken, it will continue further to the 50% line. My trade is to place a long position around current prices and to seek to take profit's in this zone. At that time, I would look to reevaluate the news and technicals surrounding the Lira. In my opinion, if the price goes back below the high of yesterday's doji, that to me would be an indicator of continued bearishness, and to switch sides of the trade as the Lira will continue getting hammered due to economic and political uncertainty in Turkey. As for trade timing, I would not look to hold this trade as we get close to the June 24th election, taking your profits sooner is better. Additionally, keep in mind we are in an overall downtrend, and I am currently recommending a long position inside of a downtrend. Generally it is not wise to "buck the trend", however due to renewed optimism around the interest rate hike, I believe an opportunity to make money exists following the bearishness that resulted in part on Erdogan's comments.
Disclosure
Remember to always do your homework before placing any trade. I take no responsibility for any losses that result in any way as a result of this analysis.
Recently the Turkish Lira has been taking a beating in part to President Recep Tayipp Erdogan saying he would take more control of monetary policy if he wins the June 24th election. In an effort to stymie the Lira's depreciation, last Wednesday the Turkish Central bank raised the lending rate from 13.5% to 16.5%. As a result, I attached a call-out box on the chart showing a large green candle that day. The Lira bottomed at about 0.203 dollars on Wednesday before rallying off of lows.
The Technicals:
This price bottom is also very close to 3 standard deviations from the 200 day moving average. Rolling support and resistance lines are drawn on the chart which are being created by my "Fibonnacci Bollinger Bands Script". Because we are still in a strong downtrend, without other catalysts, I don't anticipate a move back up to the long term resistance line for the downward channel that the Lira appears to be stuck in (Zoom out on the chart to view the long term channel, its more obvious that way). Be that as it may, in the short run, there may be an opportunity to profit off of renewed optimism for the Turkish Lira, at least in part until the June 24th election. Momentum analysis using my "Smart RSI" indicator shows during the strong sell off following Erdogan's comments unleashed an extended period of bearishness that occurred less than 5% of the time over the last 365 days. The RSI's move out of this oversold territory suggests that the bear's have become exhausted, at least temporarily.
The Trade:
It is my current belief that the price will continue to rise to the 61.8% retracement line using my FBB indicator, and if that level is broken, it will continue further to the 50% line. My trade is to place a long position around current prices and to seek to take profit's in this zone. At that time, I would look to reevaluate the news and technicals surrounding the Lira. In my opinion, if the price goes back below the high of yesterday's doji, that to me would be an indicator of continued bearishness, and to switch sides of the trade as the Lira will continue getting hammered due to economic and political uncertainty in Turkey. As for trade timing, I would not look to hold this trade as we get close to the June 24th election, taking your profits sooner is better. Additionally, keep in mind we are in an overall downtrend, and I am currently recommending a long position inside of a downtrend. Generally it is not wise to "buck the trend", however due to renewed optimism around the interest rate hike, I believe an opportunity to make money exists following the bearishness that resulted in part on Erdogan's comments.
Disclosure
Remember to always do your homework before placing any trade. I take no responsibility for any losses that result in any way as a result of this analysis.
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