The dollar slowed its decline yesterday after some Republican senators criticized Donald Trump, who again attacked Federal Reserve Chair Jerome Powell and announced criminal prosecution against him. Powell was also defended by his former colleagues, who previously held similar positions. Powell himself stated that Trump is not pursuing him personally, but is simply trying to seize control of the central bank. All this smoothed pressure on the markets and helped the dollar find a foothold.
As for data, there are no Eurozone reports scheduled for the first half of the day. Also, no speeches by European politicians are planned. This may maintain market balance. However, it should be noted that the dollar's long-term prospects remain uncertain. Talk of a possible reshuffling within the central bank ranks may again exert significant pressure on the US currency. In this regard, traders should exercise caution and consider various factors when making decisions.
As for the pound, today, in the first half of the day, a speech by Bank of England Governor Andrew Bailey is expected. His speech may concern future BoE policy. Market attention will focus on any hints of possible changes in the interest rate or revisions to economic forecasts. Investors will assess how determined the BoE is to fight inflation and what measures it is prepared to take to support economic growth. Recent data show some slowing in UK inflation, but it still remains significantly above the target. The situation is complicated by unstable geopolitical conditions. In these circumstances, the BoE needs to find a balance between containing inflation and preventing a recession.
If the data match economists' expectations, it is better to act relying on a Mean Reversion strategy. If the data are much higher or lower than economists' expectations, it is best to use a Momentum strategy.
Momentum Strategy (on breakout):
For EURUSD
Longs on a breakout of level 1.1672 may lead to the euro rising toward 1.1697 and 1.1717;
Shorts on a breakout of level 1.1646 may lead to the euro falling toward 1.1619 and 1.1591;
For GBPUSD
Longs on a breakout of level 1.3480 may lead to the pound rising toward 1.3499 and 1.3520;
Shorts on a breakout of level 1.3450 may lead to the pound falling toward 1.3417 and 1.3392;
For USDJPY
Longs on a breakout of level 159.05 may lead to the dollar rising toward 159.35 and 159.60;
Shorts on a breakout of level 158.70 may lead to dollar sell-offs toward 158.45 and 158.20;
Mean Reversion Strategy (on return):
For EURUSD
I will look for shorts after a failed breakout above 1.1676 on the return below that level.
I will look for longs after a failed breakout above 1.1652 on the return to that level.
For GBPUSD
I will look for shorts after a failed breakout above 1.3487 on the return below that level.
I will look for longs after a failed breakout above 1.3454 on the return to that level.
For AUDUSD
I will look for shorts after a failed breakout above 0.6721 on the return below that level.
I will look for longs after a failed breakout above 0.6703 on the return to that level;
For USDCAD
I will look for shorts after a failed breakout above 1.3885 on the return below that level.
I will look for longs after a failed breakout above 1.3859 on the return to that level;
