Collecting Rollover while the TRY Ranges
Updated
The CBRT has raised rates from 8.5% in June 2023 to currently standing at 50%. There was a recent CBRT meeting where rates where held at 50%. There has been a roll coaster for inflation YoY which was below 20% in 2020, rose as high as 36% in 2021, pushed up to 85.50% in 2022, dropped in 2023 to around 38% at its lowest, then pushed higher to standing at 69.8% currently. It is projected that inflation will push above the 70% lvl this year and eventually cap out and start pushing lower. The Lira is being hit hard and has lost over 80% of its value over five years due to the unorthodox method the President implemented.
But with this said, there are things going for the TRY, which is a nice carry trade (I'm in it to win it...corny (yeah I know)), with around an 18%-27% annualized gain (fluctuates), this could be some serious gains (and price has been ranging, so that is good). With the FED potentially go to lower rates in September and with the CBRT having rates at 50%, this could cause the TRY to either keep ranging or eventually push lower. But the CBRT might have to raise rates higher in order to fight inflation that is almost 20% higher than its interest rate. This makes the 30 lvl seem that much more plausible to be hit. Additionally, price is trading towards the 32 lvl and has attempted to trade below the 30 lvl a couple of times. So another hit to the 30 lvl support could potentially push it to my price target of around 27 (mean while I'll be able to collect some rollover). A standard lot holding this pair could bring in around $49 a day (depending on the rate for that day) which is a decent amount. The margin requirement for this pair, at least with my broker is 1:4, which means this pair is highly volatile and risky.
This pair can move thousands of pips in a matter of seconds and the spreads are sometimes outrageous. But, around a 1.2 micro lot would be less than $375 in margin, each pip would be a $0.01 move, and rollover per day earned would be around $0.56 a day.
The is a good chance that price will stay were it is at and push lower. The 33-35 lvl is the cap, but for price to push as high as 35, there would have to some strong catalysts to make that happen. I think this is all a self-fulling prophecy with all waiting to see when the FED will make its move. For now, the plan is to keep building in this pair, collect rollover, and wait until at least the 30 lvl is hit to make another decision on whether I want to see it play through to the 27 lvl.
But with this said, there are things going for the TRY, which is a nice carry trade (I'm in it to win it...corny (yeah I know)), with around an 18%-27% annualized gain (fluctuates), this could be some serious gains (and price has been ranging, so that is good). With the FED potentially go to lower rates in September and with the CBRT having rates at 50%, this could cause the TRY to either keep ranging or eventually push lower. But the CBRT might have to raise rates higher in order to fight inflation that is almost 20% higher than its interest rate. This makes the 30 lvl seem that much more plausible to be hit. Additionally, price is trading towards the 32 lvl and has attempted to trade below the 30 lvl a couple of times. So another hit to the 30 lvl support could potentially push it to my price target of around 27 (mean while I'll be able to collect some rollover). A standard lot holding this pair could bring in around $49 a day (depending on the rate for that day) which is a decent amount. The margin requirement for this pair, at least with my broker is 1:4, which means this pair is highly volatile and risky.
This pair can move thousands of pips in a matter of seconds and the spreads are sometimes outrageous. But, around a 1.2 micro lot would be less than $375 in margin, each pip would be a $0.01 move, and rollover per day earned would be around $0.56 a day.
The is a good chance that price will stay were it is at and push lower. The 33-35 lvl is the cap, but for price to push as high as 35, there would have to some strong catalysts to make that happen. I think this is all a self-fulling prophecy with all waiting to see when the FED will make its move. For now, the plan is to keep building in this pair, collect rollover, and wait until at least the 30 lvl is hit to make another decision on whether I want to see it play through to the 27 lvl.
Note
Price is holding up. Price previously pushed up to 32.60 and managed to drop back down to around 32.30. If a standard lot position (100,000 units, $25,000 USD) was placed on March 11 (at 32), you would currently be at a floating loss of around -$390 (about $0.31 per pip). But for rollover collected, it would equate to around $5,947.73.Why am I writing this? Well, again as long as price ranges things will be great as the positive rollover is collected. If more traders jump on this carry trade it could potentially give the Lira the boost it needs to strengthen or at least keep it from dropping. But until then, the fundamentals come into play. The USD CPI data came in earlier today at 3.3% YoY, slowing down a little, but not enough to cause the FED to change its mind (FED rate decision was today). The FED is still hawkish and is potentially only looking to drop rates to 5.10% (possible only one rate cut) from 5.50%. If inflation data pushes lower and economic data slows down, then it could spur a different reaction at the next FED meeting, at the end of July. For the CBRT, the projection is that inflation will Cap out at 75% and eventually push lower, ending the year at around 38% and a potential rate cut.
For now things look alright and I think all central banks are waiting to see what the FED will do. The best thing to do now is to keep holding and see what negative news against the TRY does (for instance, if data that points to the FED keeping rates at current lvls come out, will price still keep ranging or will it break out of the 32.60 resistance).
Note
Price is attempt to push lower but is having a hard time. Price is testing out the 33 lvl and price could push higher. The US political uncertainty is causing some issues as well as the TRY not having a strong enough carry trade presence (kind of weird seeing how a standard lot for the TRY on the long side would be over $100 a day loss if held). If the CBRT did hit the market with another round of a rate increase (even just 1%), this would ingrain in the market that they are very determined to fight inflation and stop the runaway Lira. But even at what is happening now, it is still good to collect positive rollover on the short side as the TRY's volatility dried up a little (compared to the beginning of the year). There are positives still going on for the TRY and I will still be staying in. I am thinking that price will eventually push lower, potentially starting after the US elections in the beginning of November. G7 nations (aside from Japan) are in the mist of reducing rates and it looks like the end of the year and potentially in 2025, might spur another run for risk assets. Let's see if price can still hold below the 35 lvl (July is almost done and there is around 5 months left until the end of the year).For the next 153 days, holding a standard lot would equate to earning approx. $12,575. If the TRY does push up to the 35 lvl (that would be about 20,000 pips), that would be around a $6,000 loss, which would be a net profit of $6,575. With a 4:1 ratio, that would be a gain of approximately 26%.
Y'all have some great trading out there.
Note
Price is trading above the 24 lvl and it attempting to stay below the high made near the end of August of this year. The rapid depreciation of the Lira seems to have been curbed, but the TRY is still having a hard time stopping its ascent. The 50% CBRT rates are still projected to stay until 2025 (throughout 1st QTR at least), and the FED has begun its rate cuts (50 basis point cut this month). This is what I was waiting for, so I will see if these rate cuts will finally assist in pushing the TRY lower (even with the Geo Political issues that are going on).
The Rollover Interest is still nice. This is really assisting in keeping the losses in check and there has been a small profit. Things seem to be moving along with my speculation so I will take this as a signal to build up a larger position in the pair. The FED is looking to reduce rates up until 2026 (based off their projections), so.......there might be a price where the CBRT will look to start reducing rates also. I am thinking that price might be able to drop to 33 or 32 before the CBRT starts reducing rates.
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