The Turkish Lira Got Body Slammed On Friday – Part II
Three months ago, I had a contrarian view and suggested to short the USD/TRY because history repeats itself over and over again.
Overall, the Lira has declined almost 40% this year against the US dollar.
I personally think the decline will subside and might be an opportunity to buy the Lira at some point. Just look at the Mexican Peso. When Donald Trump was running for Presidency, he called NAFTA the "worst trade deal in history." Well when he won the election, the Mexican Peso dropped 25% against the US dollar before nearly recovering most of the lost as of today.
This is definitely a contrarian viewpoint and not for the faint of heart, but I think some traders out there will take a stab and try to profit if and Turkish economy can at least stabilize and Lira's value increases again and a little help from the US dollar if and when it turns to the downside. Potential upside is at least 15%-20% or a move back down to the 5.00000 level for the USDTRY.
American pastor Andrew Brunson who was detained for two years on espionage and terrorism-related charges was released in October after U.S. officials reached a deal with Turkey’s government to secure his freedom. This went a long way with regards of relieving tensions between the US and Turkey.
Because Turkey is heavily reliant on imported oil, which is priced in dollars, the 20%+ decline in oil prices over the last 4-6 weeks have benefited the country’s economy as well.
Needless to say, as the chart suggested, prices have declined on the USD/TRY 25% since the highs back in August. I anticipate the target level of 5.00000 will get hit sometime in January.
A contrarian investor/trader is a person that takes a position that is opposed to that of the majority. The contrarian investor/trader goes against conventional wisdom. I'm learning that in trading, you have to have a different viewpoint from the Masses in order to have some type of success in the Market (as long as you cut your losses quickly and let your winners run). What type of investor/trader are you?
This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.
I find it a good rule of thumb to start to question anything that lumps you in with the masses! I enjoyed your breakdown of the Turkish Lira, I think you are correct. My only hesitation with Turkey is it is in a position of uncertainty geopolitically. First you've had the trend of them oscillating between the west and Russia, then the suppression of the 'coup' (if that was not set up by Erdogan,) Incirlik, and the recent tensions between Russia and the Ukraine. If tensions flair Turkeys next geopolitical moves could prove crucial. Im not a major player with Forex on a daily basis, but these are just more things to consider. Keep the breakdowns coming!
Great comment and totally agree, the set-up was based on what happen with the USD/MXN a couple of year ago. Nothing can go just straight up because at some point you exhaust the buyers, in addition, the buyers will start taking profits, in addition you have traders who know price is no longer on sale....these were the behind the scene makings of this trade set-up. I hope that helps with the rationale.
Nice prediction rolland. I would like to invest my equity on healthcare funds for yield-producing investement. I found some funds like Adamas Funds, Do you reccomend investing on healthcare industry?
Yes, you will see money move into healthcare as the economy stall.
https://steemit.com/stocks/@rollandthomas/time-to-ring-the-register-on-johnson-and-johnson
https://steemit.com/money/@rollandthomas/the-markets-are-getting-defensive-so-keep-an-eye-on-johnson-and-johnson
That sector will be subject to losses as well, but just not as much as other sectors. One thing to consider is the expense ratio of the fund and the funds return over time. One option to consider is XLV...The Health Care Select Sector SPDR® Fund.
I would also consider putting hedges in place, meaning a small portion of your portfolio betting the market going down.
Did this help?
Yes. Thank you