It has been 10 years since USD/TRY bottomed at 1.1488 in January 2008 and started an uptrend that is still in progress. In late November 2017, the exchange rate climbed to as high as 3.9826, but then retreated to 3.7560 as of this writing. A lot of things happened during those 10 years. The world recovered from the worst economic crisis since the Great Depression, Barack Obama made way to Donald Trump in the White House, a military coup could not remove Recep Erdogan from power and now his grip on Turkey is stronger than ever. In the meanwhile, USD/TRY seems to have been following the path of an Elliott Wave pattern the whole time.
The weekly chart of USD/TRY above shows the pair’s entire rally since January 2008. It looks like a five-wave impulse has been developing. The sub-waves of wave (3) are clearly visible, and the sub-waves of wave 3 of (3) can also be labeled as (i)-(ii)-(iii)-(iv)-(v). If this count is correct, wave (3) is over at 3.9826, which means a pullback in wave (4) should be expected to drag USD/TRY to the support area of wave 4 of (3) near 3.4000, before the uptrend resumes in wave (5) to at least 4.0000.
On the other hand, once the U.S. dollar climbs to 4.000 against the Turkish Lira, the entire five-wave impulse from the bottom in January 2008 would be complete. According to the theory, every impulse is followed by a three-wave correction in the opposite direction. So instead of joining the bulls near 4.000, we should be very careful, because a major bearish reversal should occur, once wave (5) ends.