YEN/TRY technical outlook – Japanese housewives getting in trouble

The TRY is now dropping to real value levels, as I stated in a few earlier blogs, as one of the most overvalued currencies. Against the Yen, it even took out the 2 .5 year old high at 1.52 and heading to 1.60. We are in a clear wave pattern and wave 1 was from 1.00 to 1.35. Wave 3 started at 1.07 and a 1.38 factor has a 48 points higher target at 1.55, which we already exceed. A 1.62 factor gives a magnitude of 56 points, which is at 1.63. This very likely will be the top for wave 3. This is the steepest thrust above weekly Bollinger at 1.46 for now and we can expect a pullback to 1.50 some time next week. As we also reach the USD/TRY target at 1.70 and 2.14 EUR/TRY soon, the week before the elections in the USA will likely mark the highs for now (wave 3).

The Yen trade is a bit overcrowded, since many ‘smart’ people made financing through low Yen interest and Japanese housewives have found a ‘simple’ way to make money – as their banks allowed them to leverage, they borrowed in yen and invested in high interest countries from Australia to Turkey. Turkey seemed to offer good protection, since you earned around 18% interest per year but now within 9 weeks over 40% of currency losses wiped out more than 2 years of interest – there is no free money in the markets. They were anyway lucky since the government supported a strong currency unless recently there they gave up. More pain ahead after a relief rally soon, the currency can lose another 20% within one year. A pattern in the EUR/TRY shows that 2.60 is the very likely target.

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~ by behindthematrix on October 22, 2008.

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