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The Turkish Lira is in free fall and the trend does not appear to be ending any time soon with its exchange rate against the world’s major currencies accelerating as exemplified here below.

Turkish Lira / Japanese Yen Monthly Exchange Rate

The TRYJPY exchange rate is diverging lower outside of the lower volatility band in an hyperbolic-shaped move that should push it significantly lower over the next few months.

Swiss Franc / Turkish Lira Exchange Rate

The Swiss France / Turkish Lira exchange rate shows the opposite picture with the hyperbolic move oriented upwards.

US Dollar / Turkish Lira Monthly Exchange Rate

The US Dollar / Turkish Lira exchange displays a very similar pattern to the Swiss France / Turkish Lira exchange rate.

Euro / Turkish Lira Monthly Exchange Rate

Finally the Euro / Turkish Lira exchange rate is also accelerating higher but the move looks much less dynamic compared the other pairs shown here above. There is no marked divergence of the volatility bands and for this reason the bullish trend may be comparatively closer to exhaustion, probably due to the expected weakness of the Euro currency.

 Conclusion

The Turkish Lira is in a tail spin with no respite in sight.  The observed divergence of the volatility bands foretells more pain ahead. The trend is more dynamic against the US Dollar, the Japanese Yen and the Swiss Franc but less so against the Euro.

Since the Turkish Lira now pays a massive interest rate of 17.75% it may not be a good idea to sell it short due to the cost of holding a short position that could eat into any potential profit excepted for trading short term moves. We tend to prefer fading rallies when the exchange rates become overextended when gaping away from the proximate volatility band, and to do so preferably against the Euro with the EURTRY pair seemingly closer to a reversal than the other pairs presented above.

The Turkish general elections on 24 June and 8 July 2018 could be a catalyst for an acceleration of the Turkish Lira demise in case President Recep Tayyip Erdoğan becomes reelected but the writing is already on the wall.

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