Chart of the day - EURTRY (20.01.2022)

Central Bank of the Republic of Turkey is set to announce monetary policy decision today at 11:00 am GMT. CBRT said that room for further rate cuts is over and market position itself to such scenario. However, seed of doubt was planted by President Erdogan earlier this week when he said that interest rates will continue to fall throughout 2022. There is a risk of a dovish surprise from today's CBRT meeting that could negatively impact lira. Apart from the CBRT decision, ECB is set to release minutes from its latest meeting today at 12:30 pm GMT. Christine Lagarde said in an interview today that there is no reason for the ECB to act in the same way as the Fed. However, the market environment is changing with the 10-year German Bund yield turning positive yesterday for the first time since May 2019. Sadly, today's minutes will not cover this issue. Release from ECB is expected to be a rather non-event, and certainly not as market-moving as recent FOMC minutes release.

Taking a look at EURTRY currency pair, we can see that it has been trading in an ascending triangle pattern. Volatility on the pair has dropped significantly since the last CBRT meeting and a more technical move could be on the cards. The pair is currently testing lower limit of the pattern. Traders should expect a pick-up in volatility around CBRT announcement time (11:00 am GMT). A break above either limit of the pattern could trigger a move of similar range as range of the pattern (red boxes).

Source: xStation5