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USD/TRY

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  • First Post: Edited May 16, 2014 2:26pm Apr 19, 2014 8:19pm | Edited May 16, 2014 2:26pm
I've had a keen interest in this pair for a long time. There are many factors that affect the rate of the Dollar/Lira. There is political risk to this pair right now, but one could cautiously begin scaling into a short USD/TRY position. I could easily be wrong but I see this pair hitting 2.000 by August. Depending on election results in Turkey we could see 1.85 by Christmas. I just wanted to start a discussion here as a search for interactive trading of this pair didn't turn up anything up to date.

As of today, 041914, we are looking at a market opening price up around 2.15, if USDTRY is going to become the carry I see it becoming, the 2.15 level may prove to be a nice level to short off of. We'll see. More to come later.


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Scotty B
Hello Scotty B,

Did a little analysis and your observation looks on the money(technically)
Thank you for the heads up....
Happy Easter
4x
technicals don't work on an irrational EM currency. just don't even bother.
Quoting JeremyWS
technicals don't work on an irrational EM currency. just don't even bother.
For you maybe not but according to my results they do.....
And when you say technical s there are a million ways that an instrument can be analyzed on so many time frames
so how can you say that? 25 years in pro trading first time I hear this......
Even "fundamental" traders, even Soros worked in some way with technicals...and 99% of the traders I have worked with in banks use them.....fundamentals...not too many....
I want to see a fundamental trader pick a direction and see how he besides to jump ship when things do not go in his favor...without the technicals...
Technicals work on everthing and anything......you just have to know how and when to apply them.....
Quoting 4xPIPAHOLIC
{quote} For you maybe not but according to my results they do..... And when you say technical s there are a million ways that an instrument can be analyzed on so many time frames so how can you say that? 25 years in pro trading first time I hear this...... Even "fundamental" traders, even Soros worked in some way with technicals...
true, it comes from my experience.

But EM is not G10. My time on an EM trading desk for top 5 EM bank leads to be fully believe what I say.

Yes, technicals can work, and work reasonably well on EURUSD, or AUDUSD or whatever.

but USDTRY/ZAR/THB/MYR or whatever it doesn't work...

These are tests of basic strategies... median unsuccessful, but if you increase the timeframe, they all become unsuccesful.

btw, this is with skewed risk reward ratios too..

where I'd target 5 pips risking 25 pips for example, yet it still fails on a backtest.
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and applied to a medium term time frame for USDTRY

not good.
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Quoting JeremyWS
{quote} true, it comes from my experience. But EM is not G10. My time on an EM trading desk for top 5 EM bank leads to be fully believe what I say. Yes, technicals can work, and work reasonably well on EURUSD, or AUDUSD or whatever. but USDTRY/ZAR/THB/MYR or whatever it doesn't work... These are tests of basic strategies... median unsuccessful, but if you increase the timeframe, they all become unsuccesful. btw, this is with skewed risk reward ratios too.. where I'd target 5 pips risking 25 pips for example, yet it still fails on a backtest. {image}...
Ok....I understand what you are saying......that on these pairs they don't work as good.....could be.....
But then again it depends how you use them...
your pic shows results of indicators used in a very traditional way as an enter exit method......yes like that I agree....they are not too valuable, but they can be used
in a million different other ways.....exits only while you MM the trade in a different way......in divergence with other information....in exits.....the combinations are unlimited.....you just have to have the right methodology....and I will agree the more of this indis you use that you are showing the worst it is.....
The magic is in the method of course(MM) not in the indi......but they definitely help.....

4x
Quoting 4xPIPAHOLIC
{quote} Ok....I understand what you are saying......that on these pairs they don't work as good..... But then again it depends how you use them... your pic shows results of indicators used in a very traditional way as an enter exit method......yes like that I agree....they are not too valuable, but they can be used in a million different other ways.....exits only while you MM the trade in a different way......in divergence with other information....in exits.....the combinations are unlimited.....you just have to have the right methodology....and...
yeah definitely true

but you can adjust the strategies as one pleases, just go on a currency pair and <BTST> GO to look at basic tech strategies click on EDIT and you can make your own, and optimize with <BT> GO

or for FX only, go <FXSW> GO to test all the strategies.
Quoting JeremyWS
technicals don't work on an irrational EM currency. just don't even bother.
and also want to thank you on the heads up that they do not function as well as they do on other pairs...
cause I do not trade this pair .....

I will check that out, thanks again

4x
I'm not too concerned with anything technical beyond the round number I mentioned in my first post. Investors have been willing to go long the Lira due to the rate differential. This is a risky trade due to political tension in Turkey, but if the rates remain unchanged I see this becoming a carry trade. Often times its not single events in a market that determine value day to day, but investor sentiment. If one has a decent idea on sentiment and what investors want and these conditions are being met then orderfow can be predicted in general. If traders are not getting what they want then they'll leave a market alone or discipline it.

The Lira was punished by the market due to the artificially low rates and unorthodox monetary policies. If Turkey reverts to this behavior again I'll change the sign of my trade and we'll watch the Lira trend the other way. But for now I'm thinking we'll see the Lira strengthen up until late July where the market will rebound prior to elections in August. Anything could happen between now and then, this is just my take on the situation right now.
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Okay, slowly building a short USDTRY position. This will be a carry for me if all works out. I'm putting a position together that will give the market a lot of room to do its it's thing. If the market responds as I'm hoping it will, I'll add more to my position as the Lira strengthens. Right now we are at a critical point. For all of you fellow orderflow enthusiasts, there are likely giant stops above the 2.15 level. If price reaches up above that level we could see a volatile spike that in my opinion will be absorbed by value trader's large limit orders up around 2.150-2.16.

As I mentioned in my first post, there is political risk to a short trade here. Either way there is a trade though. The Turkish PM, Erdogan, likes to flap his gums, he is the source of the political risk. He has been calling for a rate cut which could happen, though I don't see the rate being cut by much if that were to happen.

Aside from the rate differential (which softens exchange rate risk), there are other reasons to buy into Turkey. Over the past year a lot of money flowed out of Turkish hard assets--pardon the term. This has driven stock prices down and depreciated the Lira. But why is this good for us? With the Lira being so weak, the USD has more purchasing power in Turkey. Combine this with cheap assets in Turkey and you're looking at a double good deal. Turkey is far from a dying country, they are just getting started. They are the Jewell of the Middle East, the average age of citizens there is less than 30. They have a lot of growing to do. Given the tumultuous atmosphere of the Arab world as we know it today, Turkey is a safe haven. There is a lot of value there. These factors combined with the rate differential is why I see money flowing into Turkey. This would be macro orderflow, BTW, with the stop possibility I mentioned being a micro example.

One thing you'll notice about the Dollar/Lira is the spreads. They can range from 200+ to below 10. As I build my positions I wait patiently for the rate and spreads to be ideal. When we are trading this is always relative, but don't shoot yourself in the foot and get into this pair when the spread is high.

To finish up here I will state that my positions are such that I'm ready for the possibility of a spike in the rates if things don't go as planned. I still believe that we've turned a corner in Turkish monetary policy and this will ultimately bring rates back down.

Good trading all,

Scotty B
Here is a calendar of Turkey's monetary policy meetings. They have a meeting scheduled for tomorrow 042414 and will release a summary of that meeting on 043014. We can largely expect the markets to continue drifting in range until the results of tomorrow's meeting are released on the 30th. As I've stated, 2.15 is a number that should contain any upward movement.

Analysts are on both sides of the fence in regards to what will happen with rates. I'm with those who expect them to remain unchanged or changed very insignificantly. If they were to aggressively lower rates or if investors get the sense that Basci is considering doing this soon then the trade will be all but dead. The Lira will be absolutely pummeled in the market and will continue its pre January 27th slide into the abyss--historical lows at that. Not a bad trade going the other way if thats the way this plays out.

Moving from analysts to the market itself I think we are looking at a situation where investors expect an unchanged rate and further Strength in the Lira. If this were not the case I believe we'd see a lot more position covering (stronger retracement off recent lows). Instead we see a large bear flag on the daily timeframe and tight wedge patterns that are indicative of a building trend.

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Hi ScottyB - I guess from the PA that some news came out of their MPC at 11am GMT leading to that 150 pip fall. Do you have any other links to news for UsdTry? - it seems rather diffficult to find info
Regards
Islander
Trading Levels with WRBs
Hi Islander,

I haven't spoken with you in a few years. Sure hope you are doing well. First off, I was incorrect about the Central Bank's schedule for releasing interest rate info. So, to be clear, when the bank holds a MPC meeting to discuss rates, we will know the day of.

http://www.tcmb.gov.tr/yeni/eng/

All press releases regarding the lira can be found on the CBRT website:

http://www.tcmb.gov.tr/yeni/eng/

I usually just go to Google and search "Turkish Lira," and just filter for news. It'll pull up everything. I often read what the "Hurriyet Daily News" has to say about the Lira as they are a based in Turkey.

We are now a month away from another interest rate meeting. Now its a patient yet cautious waiting game.
Okay, just one other quick thought. Often times following news like we had today the market direction seems obvious. But not so fast, we are in shakeout territory. We could still see a spike turned pin bar.
Quoting Scotty B
Hi Islander, I haven't spoken with you in a few years. Sure hope you are doing well. First off, I was incorrect about the Central Bank's schedule for releasing interest rate info. So, to be clear, when the bank holds a MPC meeting to discuss rates, we will know the day of. http://www.tcmb.gov.tr/yeni/eng/ All press releases regarding the lira can be found on the CBRT website: http://www.tcmb.gov.tr/yeni/eng/ I usually just go to Google and search "Turkish Lira," and just filter for news. It'll pull up everything. I often read...

Yep - been a long time - good to see you posting again. Thanks, I have picked up on their CB website and have been looking for some other input so I will take a look at that news site and will also carry on searching.....
Trading Levels with WRBs
Hi,

Great thread with some fantastic comments.

I will agree with JeremyWS that an exotic pair like USDTRY needs to be dealt with via Fundamentals. Techies falter on EM's.

Once again, a great thread which I will follow! Keep up the good work.
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So we are nearing the end of the trading week. Not bad all in all. As of now the trade appears to be valid. We did see some stop volatility during the asian/london session that was pinned down quickly. I've highlighted those stop areas in pink, the new stop areas are green. There is no telling whether or not those areas will be gunned but I'd bet on at least the nearest one getting taken out.

I was able to get in at 2.14 during the stop hunt, I payed a 6 pip spread. I did not see the market testing 2.15 again, but we really never know. My plan is to cautiously continue scaling into the market while leaving room for the market to pull back. The trade is in the hands of the super funds now. All I can hope is that my thinking about this pair is mostly parallel with theirs. They are the ones who really push the price around. The Lira ranges a lot, like most other currencies. When it moves it tends to happen quickly for about a week then goes back into range--almost like soldiers rushing a battle field and then entrenching themselves. I'm just gonna keep the ole fingers crossed and hope we see 2.05 or better yet 2.0000 in the next couple of months.

Have a nice weekend everyone,

Scotty B
Because this trade is longer term I probably won't post every day unless the sentiment changes. Tomorrow the CBRT will release their quarterly inflation report. For the sake of the trade we of course want to see little relief in the inflation rate. If this report shows that inflation has improved and surprises investors we may see a strong pullback as the probability for near term interest rate cuts will increase. If this were going to be the case, however, I think we'd have seen more hinting at the last interest rate meeting. Also, the Borsa Istanbul 100 index has seen a sharp rise since late march on high volume with very little retracement. This is so far another indicator of strenth for this trade. As foreign money flows into turkey we should see this continue to rise. I will post a screenshot of the Borsa, I watch this on Bloomberg, here is the link for those who care monitor it: http://www.bloomberg.com/quote/XU100:IND/chart

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Hi Scotty - thanks for your update. I am actually resesrching trading this beastie intra day as its nice ranges - mostly whilst Europe is open - offer decent pips - something that is currently rather rare!

I've just banked some good ones off the 100+ pip drop that started about half an hour after this morning's LO and I can post the odd chart if so desired.....
Trading Levels with WRBs
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