USD/TRY: The calm before the storm

The USD/TRY has been moving in an unusually tight channel since the beginning of the week. In addition to tomorrow's FOMC meeting, Thursday's CBRT decisions will be watched closely by the participants. At the moment, USD/TRY is down 0.035% at 3.7412.

FOMC & EM

The Fed is widely expected to raise interest rates by 25 basis points tomorrow, pushing up the federal funds target rate to 0.75% to 1.0%. Marc Chandler, Global Head of Currency Strategy at Brown Brothers Harriman, argues that the markets are not fully pricing in the risk of more than two hikes this year.  When that repricing takes place, EM is likely to come under greater pressure.

EM is likely to come under greater pressure - BBH

CBRT

Despite the rising inflation, the current account deficit of Turkey could restrain the CBRT from raising the interest rates, putting, even more, pressure on TRY. According to the latest report, released by the Turkish Central Bank, Tukey's current account deficit stood at $2.76 billion in January, up by almost $561 million year-on-year. The CBRT's monetary policy committee is due to meet on Thursday to decide about raising, holding or lowering interest rates.Economists surveyed by Anadolu Agency predict bank will keep the lower limit of interest rates corridor unchanged.

CBRT will keep the lower limit of interest rates corridor unchanged - AA survey

Technical levels

Technical resistances for the pair are aligned at 3.75 (psychological level/Jan. 23 low), 3.7590 (Feb. 8 high) and 3.7740 (Feb. 2 high). On the other hand, the first support could be found at  3.7140 (50-DMA), followed by 3.70 (psychological level) and 3.6850 (static level).