Determinism does not exclude free will.
Deterministic reality is simply a reality where the law of cause and effect applies. Non-deterministic universe would not make any sense at all, and it's safe to say that our universe is very much deterministic.
What you're thinking here is the controversy between discrete and non-discrete reality.
In a discrete reality, same original setting will ALWAYS yield exactly the same end results. Or, if we're talking about physical model, the model will always give the same results.
In a non-discrete reality, there is an element of chance, and same original setting might result in a variety of scenarios.
Newtonian physics, special and general relativity are good examples of deterministic and discrete models of reality. They always give the same answers (within the precision of tools used).
Quantum mechanics is an example of deterministic but non-discrete model of reality. It only deals in probabilities of each end result, and always spits out probability functions as a result - and it's up to experiments to see if the seemingly random results of an experiment correspond with the predicted probability functions from the theory.
Now, free will can only exist in a deterministic but non-discrete universe, but it doesn't necessarily do it even there. In a discrete universe, everything is pre-determined, there is no element of change or real options, and in such an universe, free will truly could not possibly exist.
However, it appears that our universe is not a discrete one, there seems to be a genuine element of chance hardcoded in the structure of our world, and so far all alternate explanations for quantum phenomena (such as hidden variables) have been either unconfirmed or disproven.
However, even in a non-discrete universe that relies on chance, it's fairly hard to determine the existence of "free will". To begin with, we should define free will, and that is not an easy task at all.
So, how should one determine free will?
Is it a will independent of material confinements of the universe? This would be tantamount to a "soul", which I do not think is a serious contender for a good definition of free will.
The problem is, even as a consciousness emerges from the physical processes responsible for it, it's still basically a sum of those physical processes. It is entirely dependant on those processes (lest you lend some credence to soul hypothesis), and even if there's a random element of how exactly those physical processes turn out, it might still not be enough to qualify as a free will, if the consciousness has no true control over those random elements.
I myself define free will as follows:
If a consciousness (being the sum of some physical processes such as brain functions) can actively affect the processes from which it emerges, then it has free will.
In other words, if consciousness can affect its own actions and functioning, then I think it could be qualified to have a certain degree of free will.
I know there are problems with this (how to separate consciousness into external and internal processes when it is, in the end, a result of bioelectric signals flowing in a bag of flesh?), and it's almost certain that at least majority of what we perceive as "free will" is an illusion created by our brains to tell our consciousness that it's in charge, but I still think that on the higher level, the consciousness is the one responsible for decisions that determine the choice between two or more options (such as picking a food from a menu), or determining what exactly I want to write using my fingers as interface to the computer (as in this text). Low level functions such as motoric functions are largely unconscious, but that doesn't say anything about choices of higher levels.
However, it should be said that there are undoubtedly many other valid definitions and concerns about the existence of free will, but I hope this post clarifies the prerequisites for the free will to exist.
Free will requires universe to be non-discrete, but that is not a guarantee that any decision-making process truly has free will; it could just as easily be classified as an automaton process emerging from the material host, and even if there was an element of randomness, it could just be a result of the tiny variations from quantum level variations that the decision-making process has no control over.
It is a vexing problem, truly. But like said, I am of the opinion that consciousness renders a certain level of free will inevitable (however this is heavily dependant on definitions of consciousness and free will in the first place).
In many ways, this is similar to the question "does god exist" - it doesn't make sense to ask that question before we have a clear definition of what god is... and much like free will, there doesn't seem to be one universally acceptable (or accepted) definition.