Turkey for the Holidays?

12/5/2017: Turkey for the Holidays?

The Turkish Lira has been declining against the US Dollar for almost a decade but there are technical reasons to suspect that reward/risk has shifted in the other direction.  First, USDTRY sports a well-defined channel from the 2008 low.  The cross spiked through the top of the channel in January, retraced into September (broad based USD low) and went for a re-test of the January high in late November.  The November high is accompanied by divergence with weekly RSI and the latest high is right on the channel line.  The combination indicates potential for formation of an important price top.

The relationship between the Turkish currency and its stock market sheds light on broader reversal potential in Turkish assets.  EM currency and stock exhibit a positive relationship so non-confirmations at price extremes warn of turning points.  The November low in the Lira (high in USDTRY) was not accompanied by a low in the Turkish equity ETF (TUR).  In fact, TUR turned up from the top side of the 2013-2015 trendline.  Former resistance providing support is a positive.  The weekly RSI profile in TUR is positive and therefore promising for price.  A positive RSI profile is one in which indicator lows are above 30 (and preferably 40) at price lows and indicator highs are above 70 at price highs.  Finally, a 51 week cycle is at work in Turkish stocks.  Inflection points, including 4 significant lows since 2009, fall on this cycle.  The next cycle week is the first week of 2018.  Perhaps TUR makes a secondary low within a bullish base that week.

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TRYUSD and TUR (Turkey ETF)

TUR (Turkey ETF) Weekly