The US dollar continued to strengthen against the euro and the British pound, leveraging positive data.
The dollar resumed its upward trajectory after figures for US industrial production and building permits significantly exceeded economists' forecasts. These positive economic data provided new momentum for the US currency, which had been under some pressure recently. Industrial production in January showed unexpectedly strong growth, demonstrating the resilience of the American economy despite concerns about a slowdown. The increase in production volumes indicates healthy demand and effective operations in the manufacturing sector, a critical factor for overall economic well-being.
Simultaneously, the number of building permits issued also exceeded expectations, signaling increased activity in the real estate sector. An increase in building permits typically precedes a rise in construction activity, positively impacting job creation and related industries.
Today, the focus will shift to reports on the European Central Bank's current account balance, the Eurozone consumer confidence index, and the Bundesbank's monthly report. These data points are significant for understanding the current state of the European economy, but they are unlikely to have a substantial impact on the euro's dynamics. The ECB's current account balance reflects the relationship between exports and imports of goods and services, as well as capital flows. A positive balance indicates that a country or currency bloc is receiving more from abroad than it is spending, which typically supports currency appreciation. The Eurozone's consumer confidence index is an important leading indicator of consumer spending. If consumers are optimistic, they are generally inclined to increase spending, stimulating economic growth. However, consumer confidence has recently declined, which could signal a slowdown in economic growth and, consequently, exert pressure on the euro.
As for the British pound, weak data on the balance of industrial orders from the Confederation of British Industry would suffice to continue the decline of the GBP/USD pair. This indicator reflects manufacturers' plans regarding new orders and serves as an early signal of the state of the manufacturing sector. If the data show a decline or stagnation, it could heighten concerns about the slowdown in the British economy, negatively impacting the sterling, which has not been faring well in recent days.
If the data aligns with economists' expectations, it is better to act using a Mean Reversion strategy. If the data significantly exceeds or falls short of economists' expectations, a Momentum strategy would be most appropriate.
Momentum Strategy (Breakout):
For the EUR/USD Pair
- Buy on a breakout of 1.1798, which can lead to euro growth in the area of 1.1825 and 1.1848;
- Sell on a breakout of 1.1780, which can lead to a decline in the euro to around 1.1760 and 1.1730;
For the GBP/USD Pair
- Buy on a breakout of 1.3495, which can lead to pound growth in the area of 1.3525 and 1.3550;
- Sell on a breakout of 1.3470, which can lead to a decline in the pound to around 1.3440 and 1.3420;
For the USD/JPY Pair
- Buy on a breakout of 155.35, which can lead to dollar gains in the area of 155.67 and 156.07;
- Sell on a breakout of 154.95, which can lead to dollar sales in the area of 154.65 and 154.35;
Mean Reversion Strategy (Retracement):
For the EUR/USD Pair
- Look for short positions after a failure to break above 1.1801, on a retracement below this level;
- Look for long positions after a failure to break below 1.1779, on a retracement back to this level;
For the GBP/USD Pair
- Look for shorts after a failure to break above 1.3505, on a retracement below this level;
- Look for longs after a failure to break below 1.3475, on a retracement back to this level;
For the AUD/USD Pair
- Look for shorts after a failure to break above 0.7062, on a retracement below this level;
- Look for longs after a failure to break below 0.7038, on a retracement back to this level;
For the USD/CAD Pair
- Look for shorts after a failure to break above 1.3710, on a retracement below this level;
- Look for longs after a failure to break below 1.3682, on a retracement back to this level;
