USD/TRY

Another GREAT pair, nicely done. Only problem I have for this one is it requires a Ton of margin.

Thoughts and observations regarding today’s monetary policy committee meeting report:

Inflation to remain high, the depreciated Lira is still having an adverse effect on the inflation numbers. Inflation up in all categories from food prices to clothing and services.

Exports in the 4th quarter increased at a faster rate then imports—a good sign, money is flowing into turkey due to the still depreciated Lira.

Industrial production grew on pace with predictions, as the Lira remains weak this should continue, but will soften proportionally with the strengthening Lira. We’ll see strength in industrial production and export all the way down to 1.95, in my opinion.

Non-farm unemployment continues to fall and construction is on the rise, as I’ve stated, Turkey is growing.

“Yet, considering that the positive impact of the monetary tightening will be observed on inflation with some lag, inflation might continue to increase in the short term, partly reflecting the base effects. In the meantime, the Committee will closely monitor inflation
expectations and the pricing behavior and maintain the tight monetary policy stance until there is a significant improvement in the inflation outlook. “

Based on the above quote taken from the Quarterly inflation report, investors can have confidence in interest rates remaining unchanged in medium term.

The committee believes that current monetary policy is enough to contain inflation, but they are willing to consider further tightening—a very good sign to incoming capital prospects.

“Hence, capital may start flowing back to emerging economies. Moreover, the ECB’s possible quantitative easing might be another supporting factor for capital flows. If this scenario materializes, the Central Bank might take steps to accumulate foreign exchange reserves.”

This view on capital inflows to Turkey stands in stark contrast to what we saw a couple of years ago. Turkey wanted nothing to do with what they called “hot money” inflows and the markets really beat them up for this. This statement on the other hand really has the red carpet pulled out to foreign money and they have a plan to deal with these flows.

Fundamentals translated to actual orderflow:

Today’s report gives further confidence to a short trade. I stated last week that after information is given to a market, it’s not always a smooth ride price wise. We could easily see a shake out of loose hands in the next 24 hours. It is my opinion, however, that the market will continue downward. I see two scenarios playing out. We are on our way to 2.10. Either we will bounce off of that level and see 2.12 before continuing on, or we’ll blow right through the 2.10 level to 2.085, with a subsequent bounce off of 2.10 as resistance. This is based solely off my gut. I believe that the train is rolling now and that we’ll cover some ground over the next week and a half before the market begins flagging again as we await next month’s interest report scheduled to come out the 22nd of May.

To Islander:

Excellent work on your hundred pip score this morning. By all means share your chart and thoughts on profiting from intraday movement. You’ll notice from my charts that I am locking in profits slowly as the price falls, then opening new positions off of common sense resistance levels. That’s as fancy as I get nowadays. I look forward to hearing your thoughts on this pair.

Thanks for following along everyone and good luck,

Scotty

One last thought about the upcoming session and stops (beautiful pool of liquidity). The green line is where the stops will be, large limit orders above the stops. If we see a shakeout I'll open a position around 2.1210. As always, I'm not God, I could be wrong, just my humble analysis.

Quick check in..I've closed all my USDTRY short positions for now. I may open more during Asia, but I have a feeling the winds may be changing here. More to come later.

Scotty B

Alright, well, I'll probably be seen as bipolar as far as trading is concerned here but I have pulled the plug at this point on the Lira gaining any more strength. I think 2.10 will be it for quite some time. At a press conference on the 30th after the Quarterly Inflation Report was released, the CBRT president contradicted himself by stating that the next step would be a gradual reduction in the interest rates. This looks very bad to investors where the impetus to the flow was the high interest rates and the possible turning of a corner in Turkish monetary policy.

In my first post I mentioned the political risk of this trade. It's still there and growing, in my opinion. Turkey is a young country that has growing to do, but an economy cannot grow healthily where freedom is choked. Especially when one of the quintessential drivers of growth in our time is technology. Our friends in Turkey are not allowed to use Youtube or Twitter. Erdogan thinks that companies like Youtube and Twitter have nothing to do with freedom. Ouch. I watched the interview Charlie Rose did with Erdogan a couple nights ago and found him to be borderline psychopathic. Charlie would ask him a questions that made him angry and Erdogan's eyes would bulge from his head. So if I'm a hedge fund manager at this point in time I don't think I'd want to send any more of my clients funds to what is becoming more and more of a Turkish circus.

Thinking in terms of orderflow, there is a lot of open interest right now. I think we may very well see an unwinding of the progress the Lira has made the last 4 months. If it gets out of control this could happen rapidly. To verify this scenario when looking at the market we'll want to see strong support levels. These are signs of large limit orders--netting out those who are short at nice profits without them having to buy at someone else's asking price. I believe we began seeing this last week. I'll post a screen shot to show what I'm talking about.

I've opened a long position is the last hour just in case I'm right. Only time will tell. I have a stop set down below our low price yesterday.

Thanks for bearing with me

Looks like your "feeling" was correct

Although not shown, this hourly higher low was at the .786 fib retrace off my 4 hrly chart and I have already banked a few pips off a pre FO buy.

Although UT's ADRs have been decreasing with today's 10 day ADR at 134 pips, it can easily put on 100 pips from here which would take it up to the 2.1200 area, fib 38.2 retrace and the upper red trend line and into your supply zone......TWT

PS It was a holiday for most of Europe yesterday, so many will take today off as well, so European trading will be thinner....

PSS Great post, thanks for the info

You will see 1.95 in your dreams. I am from Turkey and let me describe the situation. I was telling people to buy USD/TRY when it was 1.8 last summer. Nobody listened I guess. Later we saw 2.39 which makes 6000 pips. There were some problems with government and that was the main reason. Now it seems going down but beware: there is psesident election in August. So until August USD/TRY will not drop too much. And at the end of year expectations are : 2,00-2,25 . You will see 1,95 in your dreams. Turkey is growing of course. Export is rising but import rises more. And we have a crazy priminister. If he decides to enter Syria, you will see USD/TRY above 2,5.

Note: Check the graph after 17tf of Dec, 2013. It went from 1,90s to 2,10s in a few days.

Thank you, Islander. Keep em coming. Delpiero, you ought to be careful man, your prime minister throws people in jail when they say unbecoming things about him on the internet. Only joking, a small fly like you needn't worry but this is true nonetheless.

One other thing I forgot to mention is the nonfarm payrolls and unemployment coming out of the US later today. If we get lucky and these numbers are favorable to the Dollar we could Islander's fib retrace to the darn pip. The market is bashing my buy order in the face as I type, ha! We'll see.

Alright, to wrap up another week. I've liquidated several short trades that I've had open for the last few weeks. Several hundred pip profit on each one. I initiated a small buy position that was stopped out. I will remain flat until next week, I will not try another long until I see better confirmation in the price. The mega funds have their own timing on these things, but I see trouble for shorting this anymore especially now that we've actually seen 2.10 traded. I think we'll flag up to 2.13-2.16. If the central bank does lower rates at the May 22nd meeting we'll see the Lira really suffer. Thats all for now.

**edit** one more thought. As the market drifted south these past couple weeks I've been bothered by the magnitude of the selling. The slope of this recent leg has troubled me, I think it is evidence of a lessening sentiment of sellers and or the result of those building longs (there has been more liquidity available to sellers).

Have a good weekend everyone,

Scotty B

I really thought we would continue south but as you can see from my last couple posts I've become a Bull. I was ignoring the giant bull flag on the higher time frames as I felt that Turkey had turned a corner. I guess not. Here is my longer time frame price projection. More to come later.

Nice to see a thread on USD/TRY, especially from such a high impact member, thanks ScottyB. I have been tradin this pair a lot lately although it is a widowmaker. Personally technically I still see it going down a bit more although the slope of the last leg worried me too. I got caught im some bad positions friday when my SL got hit on the spike, and i emotionally reentered (Still learning to overcome that). I posted on allready about this trade on "Alien's Extraterrestrial Visual Systems" thread. I will copy the post here:

Wanted to ask if this one looks good for a longer term (5-8 days) hold.

Monthly; not much on the indies RSIOMA long, 833 pointing down crossing 50 so this seems short to me.

Weekly; RSIOMA hard cross down through 80, moving with DDS. Green & Orange Stochastic pointing down (after divergence), green crossing 50 down, all but 144ADX turned from long, and 7 is now lighting up short and the 7 can give some nice runs on weekly. So also short. BUT here it looks at the bottom of a channel although its on limited data.

Daily; DS cross with RSIOMA below 80 & its MA, but not yet confirmed by green stochastic turn, although this could happen at sunday open candle close, all other stochastics pointing down with 833 sticking at 0. Coming out of squeeze with fast ADX's expanding, and the 89ADX could be looking to cross through the 144ADX from below.

H4; ADX looks messy prolly from friday but was starting to expand short before the news and all other indies look to be poiting down nicely with 833 failing 50 for a nice cross down again. But also at bottom of channel

I also wanted to point out the following setup for capitalizing on Swap although not on TRY but ZAR, I guess this will only work dependent of your brokers rates but with the rates offered by my broker you can have a as good as zero sum position that yields daily.



I had opened this position on a 230 Eu account, as you can see im basicaly long 200 usd, against ZAR, as this is triple interest daily confirmation this would work out to 0.7% daily guaranteed, although this would not be compounding unless you would incrementally increase your position. When I opened the position spread cost me 11,- eu and the basket would range between 9-13 during the day. So during the first week you would only make back spread & commision costs. You should then be able to hold it indefinitely until a few hours after a possible future rate cut/change that would null the trade. The basket should rebalance as it is zero sum.
During rollover increased spread would go as high as 24-28 eu.

So this was on a 1:100 account and during the week, i increased leverage to 1:500 and increased the position to triple its size which got taken out by a margin call during NFP which cost me half the account. Im gonna do some backchecking but im convinced that with 1:500 leverage and dubble the position of the screenshot, instead of triple i would have survived the spikes and within hours (if not sooner) the position would have balanced out again.

A double position would yield a daily 1,4% which is not bad for a zero risk carry basket. You could also use this basket without EURUSD short as a way to long EURUSD for a longer term trade.

Hey Jeff,

Thank you for checking in. First off, I'd like to acknowledge that FF is not my website. I'm not in charge of the rating system, it has changed a couple times since I've been a member here. I'm not God and I'm not a super genius. I know a lot of members who are far more qualified than myself, one being a fella whose username is Adal. That guy should have a top .01% rating. Please don't make trades because of what I say, do your own homework. This isn't necessarily directed at you Jeff, but to anyone else looking to trade blindly.

Okay..My one thought about your charts, Jeff, is that you need to take a couple steps back from the technical stuff. Before you ever apply a technical study to a chart, know the current story of your market. If you know the story and have a general direction in mind, look at your chart and deal with price 1st and foremost. Your round numbers are your clear road signs. Get an idea of where the market is at and where the general direction will take it next. For example, USDTRY is trading near 2.10. I believe we'll see an unwinding based on the story of the market and I predict the price to rise. The next major meaningful road mark would be 2.15 where we'll see profit taking. Working in that context, bring in one technical study at a time looking for buy zones. I'd challenge you to spend half your current time on the technicals and start reading up on which ever market you trade.

In your 2nd post you mention being margin called. Just remember that margin has nothing to do with traders getting rich. It's all about your broker getting rich. They know that the retail guys will get over confident and blow their accounts. Don't ever buy into the belief that leverage is a good tool in your trading toolbox, its a trick. Keep the leverage really low and focus on developing your knowledge and personal view of the markets.

Looking at USDTRY as we start another trading week, I will watch how the market reacts to 2.10. If 2.10 is support and we see buying off that level I'll try to catch a pull back, I will not enter at 2.10 again just in case. I'll probably post again later as the markets warm up bit.

Hey scotty, thanks for the advice as i said i reentered there emotionally, which remains a problem for me from time to time. I am aware of the political stuff & the huge scandal going on in Turkey, and would prefer actually to trade it long as new leaks or evidence againt Erdogan or his family could run this baby up 600 pips. I have been trading USDTRY more or less since the scandal started coming out. First to the upside and now to the downside, after noticing it actually trades pretty technical. Finding good support as we speak @2,10 now, but my technicals point to a break (i think ). I have been doing good pips trading technicals on this one.



About the second post that was just a test with that basket. There was no use in trying that on demo, I am actually looking for the right lot sizing/leverage to benefit from this Swap situation i described. So now with half the account left im putting on the same position size as the original

Just closed out this position with all but the lowest entry in profit, and left the highest running with BE SL.

EDIT: And now its falling a bit more offcourse, but I'm happy closing it like I did as i said i dont really like the slope on th last H4 drop either, if it falls further it may just be to retest 2.0870 area from early April, before making that move up.

Alright guys, we are trading below 2.1, it looks like the market wants the stops below Friday's low. One interesting thing I've been watching is the spreads when the market is testing these prices when it takes new dips the spreads are widening from <10 to >25, suggesting to me we have buyers at this level. Currently we are stalled at the low, when the stops go and we see a cascade I hope it turns into a pin bar.

Excellent work gathering those good ole pips. I just wanted to mention that the lack of follow through we are seeing right now after that low has broken says a lot also. We could still see the market plunge but the absence of further volatility at this point suggests substantial liquidity below the 2.1 level.

Agreed thats why i closed on the first break of 2,10, I would have taken a loss there if it would have bounced. It seems to bounce nicely at 80 levels (83/86 in particular) mostly after a break through a BRN, so i took that, and it did bounce up quite hard to 2,10 again but did continue down relatively fast, still happy though with liquidating this for a positive, was facepalming all weekend, wondering why i would have that much un hedged over weekend exposure in such a risky asset.

I think we will se 2.0880 before we see 2,10 again, but from here thats just not worth it, I think an absolute minimum of 60 pip SL on this one today is neccesary with the lower liquidity with London closed today. I might take a few longs if it reaches there.

GM - my research into trading this beastie for a couple of hours around FO using my 1m chart setup continues......

My system is well documented elsewhere and apart from allowing for the variable spreads.....say 7 pips to 27 or more - I just have to ignore the early readings on the TVI indicator due to the lack of tick volume overnight - it usually normalises around mid FH.

The coloured rectangles for S&R levels are initialy put on manually and then updated on the open of each bar by an indicator that was written for me.

Entry this morning was for one unit in the 06:14 gmt candle as price broke down also through the DP level. Later, TVI divergence as price approached Friday's low was the alert and the higher volumed hit of that level the exit..... and that finishes my morning. I will look again at the run up to the first NY Open at 12:00 gmt

PS @ jeffmichaels.....I agree, its usually nice, technical trading on the lower TFs - as long as you have done your research

Yeah I think trades pretty well technical, my biggest flaw is still as mentioned earlier impulse control. I lost a few pips trying to catch some fast ones that way today again. Staying the trade is still hardest for me and refraining from revenge trading, gettting better at it though. For now I am short.
Indie window 1: 8-3-3 / 21-10-10 / 100-10-10 stochastics
2: ADX 7/21/44/89/144
3"RSIOMA & Delayed stochastics
As per Alien's Extraterrestrial Visual Systems and without going into the system this looks short to me now

Thank you Islander and Jeff for your continued input. You fellas may just yet get some more down side gains. We are 17 days away from our next interest rate decision. Last month the market wedged sideways for 13 trading days up until the last interest rate announcement, retracing 650 pips. We are 13 trading days from the next rate meeting now. Inflation is expected to peak over this month and next and the CBRT has begun hinting at a rate reduction. I like to believe the market is logical in it's movement. I'm still trying to wrap my mind around why we'd want to keep shorting the Lira at this time given the fundamentals. The only real hope I see for the Lira would come from a situation where Erdogan is ousted in August and replaced by someone who has the capacity and worldview to let Turkey prosper.

Right now 2.1 is resistance, no sign of the bulls yet. I'm curios to see what London will bring tomorrow.