Cross Euro Turkish Lira is quite unusual in trading, but has recently been of interest due to the rapid growth of the Turkish economy.
Such a tool as EUR / TRY is difficult to attribute to the popular ones on Forex. Firstly, the pair does not belong to highly liquid assets, and secondly, it is quite challenging to build a strategy. But experienced traders can easily make big profits from it.
This is because a crisis is raging in the eurozone, and the Arab market, based on oil exports, shows stable and systematic growth. Since Turkey is located in two parts of the world, its economy is quite flexible and allows balancing.
Euro is used by 19 countries, each of which affects its course. Some countries with underdeveloped economies have little impact; others directly squander or strengthen the currency with their domestic policies.
To understand the current situation, the European Central Bank meets every six weeks and analyzes reports on GDP, inflation, manager's indices, and consumer indices.
As a result, a decision is made on the current euro loan rate. The higher it is, the more stable and stronger the currency. With a decrease in rates, the euro is rapidly falling in value.
Although Turkey is not a member of the EU, the country has repeatedly applied for accession and since 2000 began to work on reforming legislation actively. As a result, this led to a severe increase in all indicators and allowed the country to get the seventh most powerful economy in the world.
Despite such tremendous achievements, investors still do not consider the lira as a means to store capital during times of crisis of the most liquid currencies.
Explicit confirmation of investor concerns is the collapse of the lira in 2016-2017 when the president’s failed policy led to a significant economic downturn and almost became the cause of a coup involving the army.
But at the same time, EUR / TRY is of interest to traders, as the country has moved away from the effects of the internal crisis and is actively restoring its position. Most of Turkey’s GDP is based on the export of textile products, which ensures the liquidity of the currency.
Although the product is in demand and is relatively inexpensive, the need for it will be quite high. If the products are not exciting to European partners, Turkey has a different market - Arab countries and the Middle East.
Over the past five years, the lira has shown a constant depreciation against the euro. But this happens spasmodically, and not always changes in quotes are expected. This makes trading a high-risk pair.
When creating a strategy, a trader should be aware of this and not make transactions with potentially more significant risk, since the probability of going into a minus is very high. This is not the couple that often makes surprises and is suitable for lovers of intuitive orders.
To clearly understand the situation, we will study the schedule of quotes from 2015 to 2019. In the beginning, the ratio was 2.88 lira for 1 euro. August 2018 was marked by a peak of 7.62 lira per 1 euro, and then the rate fell to 6.64 lira per 1 euro.
These fluctuations clearly show that over four years the rate has grown almost three times, while the jumps were irregular and rapid, and the downtrends changed sharply with another increase in the value of EUR relative to TRY.
According to a report from the Turkish Ministry of Economy, the textile industry accounts for 23% of GDP, with another 15% coming from exports of transport, machinery, and metal.
Due to its territorial location, the primary market for Turkish products is the Arabian Peninsula and the countries of the Middle East. Most importers build economies based on oil production.
And this means that the lira indirectly depends on the cost of this raw material and can severely fluctuate depending on current oil prices. The most interesting thing is that the oscillations occur with a delay.
Initially, the GDP and income of oil exporters are reduced, then this affects citizens, their purchasing power drops, and then trade with Turkey decreases.
With short-term changes in oil prices, this may not be a very significant driver, but with prolonged stagnation, the lira noticeably weakens.
Scalping on the EUR/TRY pair does not promise to be profitable, as the trading corridor rarely goes beyond 100 points. Severe fluctuations can be observed on the monthly chart, but for such a trade, the trader should be sufficiently prepared.
First, beginners should learn from more liquid pairs. After studying the interdependence of economic events, it is quite possible to try your hand at EUR/TRY. With a competent strategy, a high income is guaranteed.