The dollar has slightly regained its footing, but it is still difficult to say that the pressure on it has completely lifted. Most likely, this is just a pause after a cycle of active decline.
Weak fundamental data yesterday limited the dollar's upward potential. The increase in the US trade account's negative balance and the rise in weekly jobless claims have posed problems. Traders are currently closely monitoring these macroeconomic indicators, considering them as indicators of the health of the US economy and, consequently, the attractiveness of the dollar. A negative trade balance, indicating that imports exceed exports, points to capital outflow from the country, which exerts pressure on the national currency. The increase in initial jobless claims signals a potential slowdown in economic growth and may herald a decline in consumer spending, which would also negatively impact the dollar.
Today, there is a wealth of European data in the first half of the day. Data on changes in GDP for Germany and the Eurozone, changes in unemployment numbers in Germany, the unemployment rate in the Eurozone, and the consumer price index are all expected. Markets will pay close attention to Germany's GDP as it is the largest economy in Europe, and any signs of a slowdown could significantly impact the entire Eurozone. Unemployment data will also be crucial. A reduction in the number of unemployed in Germany and a decrease in the Eurozone's unemployment rate would be seen as positive signals of a strengthening labor market. However, an unexpected increase in unemployment could raise concerns about economic growth prospects.
The morning session will conclude with the publication of the consumer price index for Germany. While inflation is no longer a key issue for the European Central Bank, any signs of rising prices could increase pressure on it.
In the UK, there are no significant data available today, so the pound will likely remain within a sideways channel, which may preserve its chances for further correction in the future.
If the data aligns with economists' expectations, it is better to act based on the Mean Reversion strategy. If the data is significantly above or below economists' expectations, the best approach is to use the Momentum strategy.
Momentum Strategy (on Breakout):
For EUR/USD
- Long positions on a breakout of 1.1945 could lead to a rise in the euro towards 1.1992 and 1.2037;
- Short positions on a breakout of 1.1897 could lead to a decline in the euro towards 1.1852 and 1.1810;
For GBP/USD
- Longs on a breakout of 1.3788 could lead to a rise in the pound towards 1.3843 and 1.3899;
- Shorts on a breakout of 1.3733 could lead to a decline in the pound towards 1.3686 and 1.3644;
For USD/JPY
- Longs on a breakout of 154.12 could lead to a rise in the dollar towards 154.35 and 154.67;
- Shorts on a breakout of 153.75 could lead to dollar sell-offs towards 153.27 and 152.85;
Mean Reversion Strategy (on Retracement):
For EUR/USD
- I will look for shorts after a failed breakout above 1.1951 on a return below that level;
- I will look for longs after a failed breakout below 1.1897 on a return to that level;
For GBP/USD
- I will look for shorts after a failed breakout above 1.3791 on a return below that level;
- I will look for longs after a failed breakout below 1.3728 on a return to that level;
For AUD/USD
- I will look for shorts after a failed breakout above 0.7045 on a return below that level;
- I will look for longs after a failed breakout below 0.6972 on a return to that level;
For USD/CAD
- I will look for shorts after a failed breakout above 1.3543 on a return below that level;
- I will look for longs after a failed breakout below 1.3496 on a return to that level;
