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Wednesday, September 24, 2008

EURTRY medium-term technical outlook


On the left hand, the weekly EURTRY, which is about to enter a severe upmove soon. The initial impulsive wave from 1.66 - 2.14 is the magnitude of wave 1 up and was countered by wave 2 down, almost back to the original starting point, which is the way big moves can build up in the early stage with the low at 1.70. Now we need to break the 1.85 resistance of the channel to get into higher gear of trending momentum, which is in a matter of 2-3 weeks. The magnitude of wave 1 is the minimum target point, but more likely it will be a 1.382 to 1.618 factor. Wave 1 had a 48 points rise, which gives a minimum target of 2.18, but more likely a 66 points upside with a target of 2.33. The time frame for this move is 4-5 months in accordance with the lows of the most equity markets in Q1 2009 (SPX around 1050 level) and XU100 heading for 28000.

The Turkish currency is still substantially overvalued, due to one of the highest interest rates in the world with high participation of Japanese housewives on one hand and smart Turkish investors having borrowed in Yen (famous carry trade) will be challenged. With a positive carry of around 18%, one can take hold out being long TRY, but a 66 point move equals 30% interest and takes away the interest you might have earned the last 2 years based on the current market price.

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