Although the euro and the pound updated their monthly lows, the pressure on these instruments eased by the end of the U.S. trading session. Apparently, traders are positioning themselves ahead of the upcoming FOMC meeting and are reluctant to take excessive risks.
Strong U.S. consumer confidence data provided support for the U.S. dollar. The Conference Board Consumer Confidence Index rose to 97.2 points in July, exceeding economists' expectations and signaling the resilience of consumer spending—one of the key drivers of the U.S. economy. This positive report helped the dollar strengthen against other major currencies. Investors view rising consumer confidence as a sign of a healthy economy, which reduces fears of a potential recession.
Today, weak GDP data is expected from both Germany and the Eurozone, so a euro rebound in the first half of the day seems unlikely. The market has already priced in pessimistic forecasts, and if the actual numbers meet or fall below expectations, this could trigger further declines in the single European currency. Traders will be closely watching not only the figures themselves but also commentaries from economists and European Central Bank officials to assess potential implications for future monetary policy.
If the data aligns with economists' forecasts, a Mean Reversion strategy is advisable. If the data significantly exceeds or falls short of expectations, it is better to use a Momentum strategy.
Momentum Strategy (Breakout):
EUR/USD
Buying on a breakout above 1.1570 may lead to a rise in the euro toward 1.1605 and 1.1637.
Selling on a breakout below 1.1530 may lead to a decline in the euro toward 1.1500 and 1.1460.
GBP/USD
Buying on a breakout above 1.3360 may lead to a rise in the pound toward 1.3386 and 1.3415.
Selling on a breakout below 1.3335 may lead to a decline in the pound toward 1.3293 and 1.3253.
USD/JPY
Buying on a breakout above 148.30 may lead to a rise in the dollar toward 148.50 and 149.00.
Selling on a breakout below 147.90 may trigger a sell-off in the dollar toward 147.59 and 147.30.
Mean Reversion Strategy (Pullbacks):
EUR/USD
I will look to sell after a failed breakout above 1.1583, once the price returns below this level.
I will look to buy after a failed breakout below 1.1544, once the price returns above this level.
GBP/USD
I will look to sell after a failed breakout above 1.3372, once the price returns below this level.
I will look to buy after a failed breakout below 1.3340, once the price returns above this level.
AUD/USD
I will look to sell after a failed breakout above 0.6532, once the price returns below this level.
I will look to buy after a failed breakout below 0.6505, once the price returns above this level.
USD/CAD
I will look to sell after a failed breakout above 1.3777, once the price returns below this level.
I will look to buy after a failed breakout below 1.3754, once the price returns above this level.
