The euro was well executed today through the Mean Reversion strategy. Due to low market volatility, there was no opportunity to trade via Momentum.
The decline in the eurozone trade balance surplus pressured the euro, but buyers took advantage of the moment to increase long positions. Overall, the U.S. dollar will continue to weaken against risk assets. It is clear that the dollar is under pressure from the relatively dovish policy expected from the Federal Reserve in the near future.
In the second half of the day, the Empire Manufacturing Index will be released, but it is unlikely to shift market sentiment in favor of the dollar. The market appears to have already priced in moderately negative data, given the broader picture of slowing U.S. economic activity. Moreover, traders are focused on global factors, such as the Fed's decision on interest rates. Geopolitical issues, including renewed U.S.–China trade tariff disputes, are also influencing the currency market. In the short term, the EUR/USD pair will likely continue its upward movement, driven by the fundamental strength of the European economy and the ECB's restrictive stance.
In the case of strong data, I will rely on implementing the Momentum strategy. If the market does not react to the release, I will continue using the Mean Reversion strategy.
Momentum Strategy (breakout) for the second half of the day:
For EUR/USD
- Buying on a breakout above 1.1760 may push the euro toward 1.1790 and 1.1825.
- Selling on a breakout below 1.1740 may push the euro down to 1.1715 and 1.1693.
For GBP/USD
- Buying on a breakout above 1.3615 may push the pound toward 1.3643 and 1.3677.
- Selling on a breakout below 1.3585 may push the pound down to 1.3555 and 1.3525.
For USD/JPY
- Buying on a breakout above 147.40 may push the dollar toward 147.75 and 148.05.
- Selling on a breakout below 147.25 may push the dollar down to 146.90 and 146.66.
Mean Reversion Strategy (reversal) for the second half of the day:
For EUR/USD
- I will look for selling opportunities after a failed breakout above 1.1763 with a return below this level.
- I will look for buying opportunities after a failed breakout below 1.1730 with a return above this level.
For GBP/USD
- I will look for selling opportunities after a failed breakout above 1.3617 with a return below this level.
- I will look for buying opportunities after a failed breakout below 1.3573 with a return above this level.
For AUD/USD
- I will look for selling opportunities after a failed breakout above 0.6674 with a return below this level.
- I will look for buying opportunities after a failed breakout below 0.6652 with a return above this level.
For USD/CAD
- I will look for selling opportunities after a failed breakout above 1.3842 with a return below this level.
- I will look for buying opportunities after a failed breakout below 1.3824 with a return above this level.
