The U.S. dollar continued its rise against risk assets, especially against the British pound, which has been facing difficulties lately.
The influence of verbal interventions from the U.S. Federal Reserve on financial markets remains significant, as does the political statements made yesterday by the Prime Minister of the UK regarding taxes. Recent statements by regulatory officials about maintaining flexibility in interest rate cuts, particularly their emphasis on decision-making at the December meeting, have triggered a wave of U.S. dollar strengthening. This effect is explained by the market's tendency to interpret such rhetoric as a signal of a more conservative monetary policy, making the dollar more attractive to investors seeking stability and higher returns.
Today promises to be eventful for financial markets. Data from Germany and the Eurozone will be in focus, potentially having a substantial impact on currency pair dynamics and investor sentiment. The trading day will commence with the release of data on changes in German industrial orders. This figure is an important barometer of the German economy, and unexpected deviations from forecasts can provoke volatility in the currency market. Concurrently, investors will monitor the Eurozone producer price index, which will provide insight into inflationary pressures in the region. Closer to noon, attention will shift to the PMI indices for the services sector in the Eurozone and the composite PMI index. These indicators, based on surveys of purchasing managers, serve as important signals of the overall state of the Eurozone economy. A reading above 50 indicates growth in business activity, while values below this level point to contraction.
The speech by the president of the Bundesbank, Joachim Nagel, is unlikely to have a significant impact on the currency market. His rhetoric has been clear and consistent recently, so we do not expect any new insights from this ECB representative.
As for the pound, statistics for the services sector will also be released today, but given that the market is under pressure from new taxes proposed by the Treasury, even positive data is unlikely to spark significant buying of GBP/USD.
If the data aligns with economists' expectations, it is best to act based on the Mean Reversion strategy. If the data significantly exceeds or falls short of economists' expectations, the Momentum strategy is the best approach.
Momentum Strategy (Breakout Deals):
For the EUR/USD Pair
- Buy on the breakout of the level 1.1500, which may lead to an increase in the euro towards 1.1535 and 1.1575.
- Sell on the breakout of the level 1.1480, which may lead to a decline in the euro towards 1.1461 and 1.1431.
For the GBP/USD Pair
- Buy on the breakout of the level 1.3031, which may lead to an increase in the pound towards 1.3061 and 1.3088.
- Sell on the breakout of the level 1.3010, which may lead to a decline in the pound towards 1.2980 and 1.2956.
For the USD/JPY Pair
- Buy on the breakout of the level 153.70, which may lead to an increase in the dollar towards 154.30 and 154.70.
- Sell on the breakout of the level 153.40, which may lead to a decrease in the dollar towards 153.00 and 158.85.
Mean Reversion Strategy (Reversal):
For the EUR/USD Pair
- Look for sells after a failed breakout above 1.1499 when returning below this level.
- Look for buys after a failed breakout below 1.1474 when returning to this level.
For the GBP/USD Pair
- Look for sells after a failed breakout above 1.3036 when returning below this level.
- Look for buys after a failed breakout below 1.3006 when returning to this level.
For the AUD/USD Pair
- Look for sells after a failed breakout above 0.6515 when returning below this level.
- Look for buys after a failed breakout below 0.6475 when returning to this level.
For the USD/CAD Pair
- Look for sells after a failed breakout above 1.4123 when returning below this level.
- Look for buys after a failed breakout below 1.4097 when returning to this level.
