The euro and the pound remained under pressure and underwent another correction, although the British pound was the least affected, thanks to recent data.
Activity in the U.S. services sector rose sharply, while the manufacturing sector began to lag again, pointing to issues within the American economy. This creates a mixed picture. On the one hand, a strong services sector suggests resilient consumer demand and overall economic activity. On the other hand, a contraction in manufacturing may indicate a slowdown in global demand caused by Trump's trade policies. The divergence between these two sectors may also reflect a structural shift in the U.S. economy, where services play an increasingly significant role. However, the manufacturing sector should not be underestimated, as it remains a vital source of jobs and innovation.
Today, the IFO survey results will be published, including indices on current conditions, business climate, and expectations for Germany. Positive figures could quickly revive interest in the euro. Otherwise, the currency pair may continue its downward trend. Investors are closely watching these indicators as they serve as key signals of the state of the German economy, which leads the eurozone. Optimistic IFO data can boost confidence in Germany's economic stability, increasing the euro's appeal. Disappointing results, however, could raise concerns about slower growth and negatively affect the single currency.
Today's economic calendar also includes the CBI retail sales report from the UK, which is unlikely to significantly impact the pound. Nonetheless, weak figures may lead to market speculation. Market participants will closely analyze any signals regarding consumer spending trends, which are an important barometer of the UK's economic health. In the current environment of heightened uncertainty due to geopolitical tensions and inflationary pressures, every economic release is subject to scrutiny.
The Mean Reversion strategy is recommended if the data aligns with economists' expectations. If the figures deviate significantly from expectations, the Momentum strategy is preferred.
Momentum Strategy (on breakout):
EUR/USD
Buying on a breakout above 1.0818 may lead to a rise toward 1.0856 and 1.0892.
Selling on a breakout below 1.0800 may lead to a drop toward 1.0770 and 1.0740.
GBP/USD
Buying on a breakout above 1.2930 may lead to a rise toward 1.2950 and 1.2970.
Selling on a breakout below 1.2900 may lead to a drop toward 1.2875 and 1.2841.
USD/JPY
Buying on a breakout above 150.75 may lead to a rise toward 151.05 and 151.49.
Selling on a breakout below 150.49 may lead to a decline toward 150.18 and 149.80.
Mean Reversion Strategy (on pullbacks):
EUR/USD
I will look to sell after a failed breakout above 1.0816 followed by a return below this level.
I will look to buy after a failed breakout below 1.0785 followed by a return above this level.
GBP/USD
I will look to sell after a failed breakout above 1.2933 followed by a return below this level.
I will look to buy after a failed breakout below 1.2901 followed by a return above this level.
AUD/USD
I will look to sell after a failed breakout above 0.6301 followed by a return below this level.
I will look to buy after a failed breakout below 0.6277 followed by a return above this level.
USD/CAD
I will look to sell after a failed breakout above 1.4330 followed by a return below this level.
I will look to buy after a failed breakout below 1.4306 followed by a return above this level.
