This is one of my favorite pairs, the TRY/JPY. This is because it pays such a nice swap, and in an environment where there is almost no yield, that of course will attract a certain amount of money regardless. On top of that, it is a purely alpha plan the sense that the Japanese yen is indeed a safety currency, while the Turkish lira is more or less a play on emerging markets and perhaps the Middle East.
With that, once the environment in the trading community is conducive to taking risk, this pair typically takes off to the other side. However, you get paid to wait, and as a result I love holding onto the straight for the longer term most of the time. A nice range bound market can actually be very profitable in this particular pair, and I believe that there is a significant chance that we will see a breakout to the upside anyway.
No man’s land.
You can see that I have two lines clearly marked on the chart. Think of this as two trenches on a battlefield. You essentially have buyers and sellers doing battle with each other, and somewhere in the middle is why it would be considered “fair value.” In other words, it’s where the market thinks that the currency pair should be at the moment. However, you can’t really take a trading that general vicinity because it’s a very good way to lose money. Essentially it’s a 50-50 chance that the market goes your direction. With that, I’m very hesitant to put trading capital to work at this point. However, if we can pull back to the 47.50 level, I think that the buyers will step back in and push this market higher. That’s the type of setup I’m looking for in order to go along of the Turkish lira again. In the meantime, I’m simply waiting for some type of supportive candle near that region. Alternately though, if we broke above the 49.50 level, I would be willing to buy as well because it would of course be a breakout of a significant consolidation area.