Turkish Central Bank to meet on Tuesday

The Turkish central bank will meet on Tuesday to decide on interest rates. It is expected to raise the benchmark repo rate by 50bp to 8.5%, although it should perhaps hike more (100+bp) to credibly defend the Turkish lira. The central bank might also continue to raise its FX swap auctions rate in an effort to get market swap rates higher as well. This would increase the cost of selling the TRY and - in lieu with a hike in the repo rate - provide additional support to the currency. I'm selling EURTRY at 4.0524.

EURTRY Daily 23/01/2017Open positions as of 23/01/2017 9:18am CET:
EURTRY short from 4.0524, unrealized return: flat

Realized YTD return: +0.7% from 2 trades
Total YTD return: +0.7% from 3 trades

Watching NZDJPY for breakout

Let's be honest: It's been a rather boring week in FX and I'm happy it's drawing to a close. Yellen's comments didn't really provide any new information, yesterday's Draghi presser was a snoozer, volatility in G10 FX was subdued. Only Theresa May's Brexit speech moved markets by giving a short-lived boost to the GBP, but that's unlikely to persist with actual Brexit negotiations on the horizon.

Looking forward, Trump might stir things up from early next week. I still favour USD long trades but, as I've said before, I'm waiting for a catalyst before entering into a new position.

I also like NZDJPY long with a potential breakout above 83.29-.75 that might extend to 88 or even 93. In addition, the pair offers a bit of a carry pickup. On the sidelines as of now, but standing ready to open that trade if momentum doesn't fade.

NZDJPY 20/01/2017G10 Interest Rates 20/01/2017Open positions as of 20/01/2017 9:00am CET: Flat

Realized YTD return: +0.7% from 2 trades

Selling USD vs EUR & TRY

Following yesterday's disastrous Trump press conference I'm buying EURUSD at 1.0646 with a first target at 1.0720 (trendline from 2002). I'm also selling USDTRY at 3.81. Originally, I was going to buy TRY vs EUR to pick up carry but with Trump being the clown that he is I'm hoping for USD weakness in the short term.

Update 3:50 PM CET:
USDTRY short closed at 3.77 for quick 1.06% profit, EURUSD long still open

TRY slammed amid Turkey democracy worries

The TRY lost a staggering 8.9% vs. the USD year-to-date to hit an all-time low amid fears Turkey's president Erdogan might succeed in abolishing democracy in the troubled country. The currency even surpassed the Mexican peso as the worst-performing EM currency relative to the USD.

Things aren't looking much better in EURTRY with the pair hitting 4.1 during early European trading. Given that the carry is very tempting (and with the prospect of the Turkish central bank potentially having to raise interest rates later in January), I'm pondering when to go short EURTRY. However, with negative TRY momentum still going strong I'll refrain from putting on a trade at the moment. Falling knives are falling particularly fast in the case of troubled EM currencies, and I'm not going to catch this one!