close icon

USDTRY Ruled by Elliott Wave, Not Erdogan

Ten days ago, on July 15th-16th, there was an attempted coup in Turkey against the government. It failed, but left over 300 people dead and more than 2000 injured. The consequences of the crisis are still unfolding with nearly 6000 military and many more civil citizens being arrested and, according to western media, tortured in Turkish prisons.

On the financial side of things, the Turkish lira has been crashing against the major currencies. Other countries have warned their citizens not to travel to Turkey, making the demand for the lira fall, which leads to its decline against the U.S. dollar, the pound sterling and the euro. It makes sense, but should we just blindly rely on this tendency to continue? As we have always said, news does not drive the markets, so let’s see a chart of USDTRY, in order to see how the situation looks like through the prism of the Elliott Wave Principle.
usdtry 26.7.16
On the daily chart of USDTRY we see that the pair has been moving sideways between 3.0742 and 2.7540 since September, 2015. In addition, the consolidation has developed a contracting shape as time passed. There is one Elliott Wave pattern, which perfectly describes this kind of price action – the triangle. Triangles consist of five waves, labeled A-B-C-D-E, where each wave is smaller than the previous one. They are sideways corrections, which interrupt the larger trend.  As you can see, the chart above makes these characteristics easy to recognize. On June 24th, wave E of the triangle was over at 2.8359 so it was time for USDTRY to resume its uptrend, which has been in progress before that. Therefore, the rally, which began on July 15th is a natural consequence of the pattern, which simply coincided with the coup attempt in Turkey. In other words, with or without a coup, the Turkish lira could be expected to decline against the U.S. dollar, because once a correction is over, the larger trend resumes.

Okay, but what to expect from now on? Should we wait for more news from Turkey? Should we look forward to some announcements by president Erdogan or other government officials? We would rather rely on the information the market provides, because the Elliott Wave principle can tell us exactly what should follow after a triangle pattern. Triangles are known to precede the final wave of the larger sequence. The triangle terminated in wave E at 2.8359, so the following advance is supposed to be the last wave of a larger degree uptrend. Once it is over, a bearish reversal should occur. Right now, it seems that USDTRY has a couple of fifth waves left to make and could probably climb to the area near 3.1500. However, if this is the correct count, this is not the time to join the bulls, because they might be running out of steam. Despite the Turkish political crisis, the lira might start recovering soon, for everyone’s surprise.

Sources: 

http://www.bbc.com/news/world-europe-36818401

http://www.aljazeera.com/indepth/opinion/2016/07/turkey-night-ordinary-hero-160725175106299.html

http://www.independent.co.uk/news/world/europe/detainees-beaten-tortured-and-raped-after-failed-turkey-coup-amnesty-says-a7154091.html



Stay informed with our newsletter

Latest Elliott Wave analysis on different topics delivered to you weekly.

Privacy policy
You may also like:

USDJPY Pattern Makes More Sense than Politics

The last two weeks were different like night and day for USDJPY traders. The pair fell from 108.47 to 106.48 during the first three days of October and eventually closed the week in negative territory. The last five trading days, on the other hand, told a much different story. Last week, USDJPY rose from 106.66…

Read More »

GBPAUD Elliott Wave Setup Supports the Bears

Between July 30th and August 26th, GBPAUD managed to recover from 1.7561 to 1.8337. Despite the no-deal Brexit prospects, the Australian dollar turned out to be even weaker than its British rival for almost a month. However, GBPAUD is down by roughly 400 pips since August 26th. Traders are probably wondering if this is a…

Read More »

EURUSD Absorbs Economic, Trade War and G-7 News

EURUSD made a new low last week. The pair fell to as low as 1.0963 on Friday adding to the downtrend it has been trading in since February 2018. The last time the European currency traded this low against the greenback was in May 2017. The last few months have been characterized by new lows,…

Read More »

Trump Didn’t Drag USDJPY Down. Elliott Wave Did

USDJPY plunged sharply last week after President Trump’s latest China tariff threats. The pair reached a high of 109.32 on Wednesday, July 31st, but finished the week below 106.60 on Friday. However, just because something happens after something else, it doesn’t mean there is causation between the two. In USDJPY’s case, the stage was set…

Read More »

GBPNZD Falls as No-Deal Brexit Looms

The possibility of a no-deal Brexit received another boost after Boris Johnson became Prime Minister of the UK. The market, however, doesn’t seem to like those prospects. The Pound Sterling has been losing ground against the Euro, the Aussie, the US dollar and other rival currencies. GBPNZD is down, too. Less than three months ago,…

Read More »

USDCNH Looks Bearish in the Midst of a Trade War

Less than a month ago USDCNH rose to 6.9621 and it looked like reaching a new multi-year high above 7.0000 was only a matter of time. Unfortunately for the bulls the market chose otherwise. USDCNH fell to 6.8164 on the last day of June. As of this writing, the pair is hovering around 6.8755 following…

Read More »

USDCHF Bears in Charge. Time for a New Key Level

On May 30th USDCHF was trading near 1.0100 in an attempt to recover from a decline from 1.0238 to 1.0009. The bulls had managed to add more than 90 pips and seemed determined to get the job done. Unfortunately for them, there was an Elliott Wave pattern suggesting their efforts were most likely going to…

Read More »

More analyses