The euro and the pound both experienced a decline following Trump's announcement of trade tariffs impacting several countries, including Canada, Mexico, China, and the European Union.
Investor concerns are heightened by the unpredictability of Trump's trade policies and the potential negative effects of these new tariffs on the global economy. Comprehensive tariffs could lead to more serious trade wars, as retaliatory measures are likely, which could significantly affect the economies of many countries that rely heavily on international trade.
The euro is particularly vulnerable due to European countries' dependence on exports. The implementation of tariffs on EU nations could diminish the competitiveness of European goods in the global market, resulting in reduced export revenues and further weakening the euro. Additionally, the strengthening of the U.S. dollar—boosted by the increased attractiveness of U.S. assets during uncertain times—puts additional pressure on the European currency.
If the data aligns with economists' expectations, it is advisable to follow the Mean Reversion strategy. Conversely, if the data considerably exceeds or falls short of expectations, the Momentum strategy would be more appropriate.
Momentum Strategy (on breakout):
EUR/USD
Buying on a breakout above 1.0400 could lead to a rise toward 1.0430 and 1.0460.
Selling on a breakout below 1.0375 could push the euro down to 1.0349 and 1.0320.
GBP/USD
Buying on a breakout above 1.2598 could push the pound toward 1.2630 and 1.2665.
Selling on a breakout below 1.2570 could lead to a decline toward 1.2550 and 1.2520.
USD/JPY
Buying on a breakout above 149.90 could drive the dollar up to 150.20 and 150.60.
Selling on a breakout below 149.60 could lead to a drop toward 149.30 and 148.70.
Mean Reversion Strategy (on pullbacks):
EUR/USD
Look for selling opportunities after a failed breakout above 1.0413, once the price returns below this level.
Look for buying opportunities after a failed breakout below 1.0374, once the price returns to this level.
GBP/USD
Look for selling opportunities after a failed breakout above 1.2620, once the price returns below this level.
Look for buying opportunities after a failed breakout below 1.2563, once the price returns to this level.
AUD/USD
Look for selling opportunities after a failed breakout above 0.6248, once the price returns below this level.
Look for buying opportunities after a failed breakout below 0.6197, once the price returns to this level.
USD/CAD
Look for selling opportunities after a failed breakout above 1.4459, once the price returns below this level.
Look for buying opportunities after a failed breakout below 1.4427, once the price returns to this level.
