The US dollar continued its rise against a range of risk assets, indicating sustained demand and trader concerns about future Federal Reserve policy.
Strong data on US new home sales contributed to further dollar strength. Traders revised their forecasts on future Fed policy, expecting the central bank to keep rates higher for longer than previously thought. This increased the dollar's appeal as a more profitable and reliable asset. Meanwhile, the impact was strongly felt on European markets. The euro noticeably declined against the dollar, raising concerns among European exporters. A stronger dollar makes European goods more expensive for American consumers, potentially reducing export volumes and putting pressure on the eurozone's economic growth.
Today, key reports are scheduled for release: the German GfK Consumer Climate Index, eurozone private sector lending, and M3 money supply growth. These figures will be used to assess the current state of the eurozone economy and to forecast its future development. The German GfK consumer confidence index is a key indicator of consumer sentiment and spending, which in turn drives economic growth. Private sector lending reflects the availability of credit for businesses and households, while M3 money supply (which includes cash in circulation, deposits, and other liquid assets) can provide insights into current inflation trends and ECB monetary policy. The publication of these numbers is expected to spark increased volatility in the financial markets.
For the UK and the pound, retail sales data from the Confederation of British Industry is due today. This report will serve as an indicator for assessing consumer demand and the overall health of the UK economy. Experts closely examine such figures to determine whether they indicate stable economic growth or a slowdown. If the numbers come in below expectations, this may intensify pressure on the Bank of England regarding monetary policy and further weigh on the pound.
If the data matches economists' forecasts, it's best to act based on a Mean Reversion strategy. If the data significantly beats or misses forecasts, a Momentum strategy is preferred.
Momentum Strategy (Breakout):
EUR/USD
Buying above 1.1762 could push the euro up to the 1.1790 and 1.1818 areas
Selling below 1.1735 could lead to a drop in the euro to the 1.1700 and 1.1664 zones
GBP/USD
Buying above 1.3467 could send the pound up to 1.3500 and 1.3535;
Selling below 1.3430 could trigger a decline to 1.3380 and 1.3340;
USD/JPY
Buying above 148.95 could push the dollar up to 149.30 and 149.65;
Selling below 148.55 could prompt a fall in the dollar to 148.30 and 147.95;
Mean Reversion Strategy (Pullbacks):
EUR/USD
Look for short trades after a failed breakout above 1.1759, on a return below this level;
Look for long trades after a failed breakout below 1.1733, on a return above this level;
GBP/USD
Look for short trades after a failed breakout above 1.3469, on a return below this level;
Look for long trades after a failed breakout below 1.3442, on a return above this level;
AUD/USD
Look for short trades after a failed breakout above 0.6608, on a return below this level;
Look for long trades after a failed breakout below 0.6585, on a return above this level;
USD/CAD
Look for short trades after a failed breakout above 1.3903, on a return below this level;
Look for long trades after a failed breakout below 1.3878, on a return above this level.
