Closing my EURTRY short trade

Since EURTRY failed to break through the 50% Fibonacci retracement at 3.9083 on Friday and RSI is back in neutral territory, I closed my EURTRY short trade at 3.9354 this morning. Having opened the position at 4.0524 on 23 January, this translates into a quick 3.64% spot+carry return. I still like the pair for shorts, but considering the sharp TRY recovery since January I'd rather watch from the sidelines until a new selling opportunity presents itself.

EURTRY Daily 13/02/2017Open positions as of 13/02/2017 08:44am CET:
EURUSD short from 1.0795, unrealized return: +1.51%

Realized YTD return: +4.34% from 3 trades
Total YTD return: +5.85% from 4 trades

USD struggling s/t albeit positive jobs data

The US dollar index is struggling not to fall considerably below the 100 handle. It's currently testing its support at 99.43. Looks heavy short-term, but I stand by my USD long call m/t. Verbal interventions from politicians only have short life spans, causing plenty of interim volatility without leading to any permanent changes in market positioning. All things considered, Trump's promised stimulus package is USD positive, thus challenging the president's conviction that the dollar is too strong relative to the currencies of America's trading partners. The only serious challenge for USD longs would be 1) an undermining of the Fed's independence, or 2) a possible G20 accord to weaken the US dollar (G20 meeting in Hamburg in July), but either scenario is unlikely.

Dollar Index DXY 02/02/2017 EURUSD 02/02/2017 DailyDifferent battleground: I'm still confident in my EURTRY short position. As the Turkish lira is finally gaining a bit of momentum I'm looking for a test of 4.0. Merkel meeting Erdogan today. Nothing market-moving will come out of that meeting, but the outcome will be interesting nonetheless.

EURTRY 02/02/2017 DailyOpen positions as of 02/02/2017 9:42am CET:
EURTRY short from 4.0524, unrealized return: +0.83%
EURUSD short from 1.0795, unrealized return: -0.06%

Realized YTD return: +0.7% from 2 trades
Total YTD return: +1.47% from 4 trades

Turkish central bank keeps benchmark rate at 8%

The Central Bank of the Republic of Turkey surprised markets today by keeping its benchmark repo rate at 8%. It had been expected to hike the repo rate by at least 50bps to attract more investments in the tattered Turkish lira. Instead, the central bank decided to raise the overnight lending rate from 8.5% to 9.25%. It also hiked the late liquidity window lending rate by 100bps to 11% (commercial lenders have been forced to borrow at the expensive late liquidity window rate since mid-January).

EURTRY Intraday 24/01/2017

In a first reaction EURTRY jumped by roughly 2% to 4.1090, but the TRY quickly rebounded and is currently trading at 4.0573. The surprise central bank decision might support the TRY in the short term, but a more determined rate hike will be required to substantially bolster the Turkish currency, in my opinion. I'm staying in my EURTRY short trade for now (down by 0.12% as of this writing), because I still expect the Turkish central bank to realize it will have to do more soon. My guess would be a large surprise hike in the repo rate, perhaps combined with another unconventional policy measure to stop the bleeding. Still, I'm well aware of the risk involved in this trade and I'm prepared to close the position if my expectations don't materialize.

Open positions as of 24/01/2017 8:09pm CET:
EURTRY short from 4.0524, unrealized return: -0.12%

Realized YTD return: +0.7% from 2 trades
Total YTD return: +0.58% from 3 trades

Turkish Central Bank to meet on Tuesday

The Turkish central bank will meet on Tuesday to decide on interest rates. It is expected to raise the benchmark repo rate by 50bp to 8.5%, although it should perhaps hike more (100+bp) to credibly defend the Turkish lira. The central bank might also continue to raise its FX swap auctions rate in an effort to get market swap rates higher as well. This would increase the cost of selling the TRY and - in lieu with a hike in the repo rate - provide additional support to the currency. I'm selling EURTRY at 4.0524.

EURTRY Daily 23/01/2017Open positions as of 23/01/2017 9:18am CET:
EURTRY short from 4.0524, unrealized return: flat

Realized YTD return: +0.7% from 2 trades
Total YTD return: +0.7% from 3 trades