The pound and the euro worked perfectly today through the Mean Reversion strategy. I tried trading the yen using Momentum, but the outcome was not great.
Today's calm in the Eurozone economic calendar allowed the euro to take a breather after recent turbulence. The absence of fresh data that could shake traders' confidence played into the hands of those who see further growth potential in the single currency. Yesterday's Fed decision, which confirmed its commitment to a dovish monetary policy, continues to support risk assets, including the euro.
In the second half of the day, we expect figures on U.S. initial jobless claims, the Philadelphia Fed manufacturing index, and the leading indicators index. These data will be important benchmarks for assessing the current state of the U.S. economy and labor market sentiment. Traders will closely watch for any signs of a slowdown in labor market growth, something Jerome Powell warned about yesterday. The number of initial jobless claims is a leading indicator of labor market conditions. An increase in this figure may indicate a decline in employment and a deterioration in economic activity. Conversely, a decrease in claims suggests labor market strength and improved business confidence.
The Philadelphia Fed manufacturing index reflects business activity in the region's manufacturing sector. The leading indicators index is an aggregated measure that includes ten different economic indicators considered to forecast future economic conditions. Changes in this index can provide insight into the direction the economy may take in the coming months.
In the case of strong data, I will rely on the Momentum strategy. If the market shows no reaction, 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 1.1860 may lead to growth toward 1.1903 and 1.1937;
- Selling on a breakout below 1.1825 may lead to a decline toward 1.1790 and 1.1750.
For GBP/USD
- Buying on a breakout above 1.3670 may lead to growth toward 1.3717 and 1.3746;
- Selling on a breakout below 1.3625 may lead to a decline toward 1.3590 and 1.3555.
For USD/JPY
- Buying on a breakout above 147.40 may lead to growth toward 147.72 and 148.05;
- Selling on a breakout below 147.05 may trigger sales toward 146.70 and 146.31.
Mean Reversion strategy (pullback) for the second half of the day:
For EUR/USD
- I will look for selling opportunities after a failed breakout above 1.1877 with a return below this level;
- I will look for buying opportunities after a failed breakout below 1.1818 with a return above this level.
For GBP/USD
- I will look for selling opportunities after a failed breakout above 1.3683 with a return below this level;
- I will look for buying opportunities after a failed breakout below 1.3621 with a return above this level.
For AUD/USD
- I will look for selling opportunities after a failed breakout above 0.6671 with a return below this level;
- I will look for buying opportunities after a failed breakout below 0.6637 with a return above this level.
For USD/CAD
- I will look for selling opportunities after a failed breakout above 1.3788 with a return below this level;
- I will look for buying opportunities after a failed breakout below 1.3758 with a return above this level.
