ACFX SPECIAL REPORT – TURKEY
The Turkish economy has experienced a minor miracle in recent years. This country’s economy has risen like a phoenix from the debt crisis of the late 1990’s. The transformation has turned Turkey into a regional industrial powerhouse.
Economic growth and prosperity have brought Turkey an enhanced status on the international stage. The benefits to Turkey such as cementing itself as a member of the exclusive club of G-20 nations and a greater in international negotiations.
A strong and growing economy brings with it a greater confidence. The Turkish Government has been able to flex its muscles as it looks to protect its economic, political and strategic interests in the Middle East region.
Unfortunately, this brought the Turkish Government into direct political conflict with the goals of the Russian Federation.The cost to the Turkish economy has been damaging as sanctions imposed by the administration of Vladimir Putin’s Russian Government is expected to be in the region of US Dollar 9 billion per year.
The sanctions that have been imposed by the Russian Government could not have come at a more unfortunate time. Emerging nations such as Turkey have benefited from an extended period of low US interest rates.
The US Federal Reserve has committed itself to increasing interest rates during 2016. The prospect of higher yields received from investments in US debt has resulted in capital flowing away from Emerging Market nations such as Turkey.
The uncertainty that has shown itself in the forex markets as investors have reduced their exposure to the Lira and bought the US Dollar. However, the weakness in the Lira can be traced back to July 2011. From a monthly aspect, USDTRL at this period was trending in an uptrend with the price-action moving above the support of the cloud and the Kijun-Sen and Tenkan-Sen.
The weekly time frame demonstrates the importance of using a top-down approach when one tries to analyze the markets. Although an Ichimoku Kinko-Hyo strategy should allow a trader to focus on the one-time frame, it can be seen that breaches beneath the cloud have offered buying and not shorting opportunities. In fact, it can be seen that corrective moves down to both the Tenkan-Sen and Kijun-Sen have opportunities to buy the US Dollar and sell the Lira. Although I would like to stress that these trends are intact until they end.
The daily time frame has allowed investors to jump on the trading opportunity in the direction of the higher monthly and weekly time window. At the moment, however, USDTRL is currently trading within the cloud congestion area, and the Chikou Span is not giving any clear directional signals. Traders of the USDTRL would now be waiting for a move above the cloud, and the 3.0050 level as this could be sufficient for the Chikou Span could confirm resumption of an upside breakout.