The Turkish Lira Is Toasted, Next Turkey?

Back in August 2015 I wrote Geopolitical Forecasting Through Technical Analysis: Is Turkey About to Destabilize the Middle East?

It was based on fundamentals in Turkey and also the chart of iShares MSCI Turkey ETF (TUR) I was very early, and I was somewhat off in 2016 with 2016 Will Be A Bad Year for Turkey and 2016 Forecast: Turkey Collapses and 2017 Will Be Worse for Turkey. The currency depreciated throughout this period, but TUR held up.

That said, while I am almost always a few years early with my calls, I stuck with a negative outlook on Turkey because nothing improved, not even the charts. As I wrote in the 2017 post:
The head-and-shoulders pattern of TUR has a target price in the low single-digits, a more than 90 percent drop from current levels. Given the price target, Turkey's increasingly religious government, Europe's growing nationalism, the United States potentially warming relations with Russia and Turkey's conflict with Russia, the geopolitical forecast points to Turkey potentially losing NATO membership. Or de facto loss of membership if NATO refuses to defend Turkey from Russian attack because it fingers Turkey as the aggressor. It's also possible the West could enact economic sanctions and send the Turkish lira into a death spiral.
It appears Trump has done that with his sanctions on Turkey, the final backbreaking straw for the market.

Potential wildcards moving forward include a flood of migrants into Europe. Turkey has 3.5 million refugees and already threatened to let them out. Sweden votes on September 9 and some polls already have Sweden Democrats as the largest party in Sweden. Reflexivity is working in politics too.

All Turkey posts.

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