TRY/JPY – Is It Safe To Carry Lira Now?

TRY/JPY – Is It Safe To Carry Lira Now?

Turkish Lira has seen better days, but to be honest, the euro has seen worse days as well? . Lira recovered against most if not all major currencies since the Turkish Central Bank tried to stop the slide in Lira increasing significantly interest rates, and traders are still wondering again if the rates high carry interest worth the risk right now.

Since this is a matter of interest deferral, it makes the most sense to pair with Lira currency with the lower interest yield - Yen. In addition, compared to USD and EUR, Yen appears to be weaker than the Bank of Japan is interested in keeping Yen weakened for a long period of time. Therefore, TRY / JPY will be able to have both central banks afloat maintenance. On the other hand, the Fed remains on track to narrowing further action will lead USD, while several members of the ECB has explicitly said they want EUR less, most if not all of them are reluctant for them to cut interest rates further, resulting in the market suspect they will not actually do it, or at least not in the near future. Therefore, USD / TRY and EUR / TRY traders can find Lira have a greater chance of weakening against these two currencies.

Weekly Chart

However, while TRY / JPY is the best candidate for the carry trade, does not mean that it is a good time to do it. Looking at the price action, we can see that despite the rebound over the last 2 weeks, the downtrend remains intact. Certainly, the price bounced off of support and 43.0 Bottom Channel, but we are still below the 46.8 significant ceiling was at stake before March-April 2012, which happens to be the swing low seen on the last week of August 2013. stochastic readings are bullish definitely improves the possibility of price break 46.8, but even if bulls have successfully Top channel to watch their faces, giving them very little room for a further increase.

It should also be noted that TRY / JPY has been trading extremely bearishly in 2013, when Yen weakness was for all to see. As such, one wonders if the above led BOJ Yen weakness is any significant advantage in this case as weak Lira seems to outshine everyone.

Then, when we execute a carry trade, we are not really aiming for capital gains (eg trading TRY / JPY higher), but simply seeking interest returns. When yields are high enough interest, we can even accept certain amount of capital losses (eg TRY / JPY down) the interest earned will be able to buffer against loss. In this regard, although TRY / JPY can not look the most optimistic, but as long as prices remain within an acceptable range, it can still be worth keeping a losing position that gives the carry interest.

looking at the price action should Lira weakness continue to rule, it will not be surprising to see prices fall to 43.0 and perhaps as low as 40.25. Any less than that will represent a downward extension and we could see the extreme bearish sell-off below that level. Therefore, the classic carry traders will likely close below this price. Assuming our 40.25 is lower and we open our position today, this would amount to a loss of 11.85% (current prices TRY / JPY 45.66). If your opening position with OANDA, you will be able to enjoy bear interest of approximately 7.93% based on interest rates today (note: different brokerage houses offer a different transport interest) . Therefore, in theory, as long as TRY / JPY does not fall below 40.25 in the next 1.5 years the transport trader will remain in the dark. Is it safe to make a 1.5 year bet now? This is an answer that individual traders must meet based on their risk appetite.

Alternately, traders can wait a little longer for prices to move lower before entering therefore lower potential loss but more likely that the S / L will be triggered. Another way is to wait TRY / JPY recovered much and give additional deposit that prices will not collapse further. But it also means that your entry price will be higher, and the potential loss will also be higher. Basically, you can not have your cake and eat it - take risks is a must - but since this is a position over several years (as all should carry trade), traders will do well to make sure they will be comfortable with the potential loss before committing as anything can happen in the long term

More links:
gold Technicals - Bulls Bears Roaming Free After Banished
AUD / USD - Threatening the resistance level of 0.0 [
EUR / USD - Make a push Through resistance at 1.3650

This article is only for general information purposes. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or its subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

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