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Another Blow-Off Top For The U.S. Dollar Vs. The Turkish Lira

Another Blow-Off Top For The U.S. Dollar Vs. The Turkish Lira

Did the misery for the Turkish lira (USD/TRY) just reach a climactic end?

USD soars vs TRY and just as quickly reverses; 2.88 is key

The U.S. dollar quickly soars against the Turkish Lira and just as quickly reverses its gains. The 2.88 level is key.

The Turkish lira quickly lost favor in the wake of more political turmoil in Turkey. Most of the losses actually occurred right before midnight Friday (Eastern U.S. time) and within minutes. This delayed but sharp reaction made the move look highly suspect. The rapid reversal of that loss seems to confirm the appearance of a blow-off top where the last panicked sellers of the lira have finally exhausted themselves.

15-minute chart shows sudden, brief weakness in USD/TRY

This 15-minute chart shows a sudden and brief bout of weakness in the Turkish lira. It looks like an accidental blip that could translate into a climactic top for USD/TRY.

On Wednesday, August 19, 2015, Turkish President Tayyip Erdogan announced his ruling party had failed to form a government. This ends many weeks of political negotiations attempting to find a junior partner for the ruling AK Party. The failure increases political uncertainty in Turkey and puts the country on track for another election.

The lira weakened in the weeks going into the last election, but the move ended with USD/TRY making just a marginal new all-time high. The election also created a blow-off top. At that time, I did not think the lira’s new strength would last. I am of the same mind now. Even as I am fading the blow-off top, I am prepared for signs that the lira’s weakening momentum will continue. However, one has to wonder just how many more blow-off tops explode on USD/TRY…buyers have had a very long and successful run…

Full disclosure: Short USD/TRY

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