The TRY/JPY pair had a rather back-and-forth session on Friday, officially widening the range but hanging around the 48 handle still. This was an area that had previously been resistance so I do like it for support, but is within a larger consolidation area that I believe makes more sense and quite frankly is more important.
This is one of my favorite carry trade pairs, as the Turkish lira offers a large interests payment at the end of the day. Quite frankly, as long as we remain range bound, I see no reason whatsoever to short despair, as simply collecting the interest at the end of the day is one of the best ways to invest in the currency markets with the exotic pairs such as the Turkish lira versus the Japanese yen.
Headline risks are subsiding
For a while, I believe that the Syrian conflict as well as the Iraqi conflict caused issues for the Turkish lira as concerns of a widening of conflict caused concern. This would be especially true with the issue going on in Kurdistan, as that only exacerbated the issues with the Erdogan government and scandals continue to cause a lack of confidence. Quite frankly though, I think the so-called “smart money” started getting involved in this pair somewhere closer to the 45 handle. With that, I’ve already made a substantial amount of money during the course of this year simply holding onto this trade and doing nothing with it. In fact, I like buying on pullbacks and simply adding small positions in order to compound the interest as it were.
Ultimately, believe this can be very profitable and I do believe that the breakout for the upside given enough time. If we can ever get about 50 handle, I believe that this market will then head to 52, perhaps even higher than that. At this point time, as long as we are above the 47 handle, I have no interest in selling this pair whatsoever. With that, I remain bullish but recognize that it’s going to take some time to make serious money.