The euro and the British pound performed very well today using the Momentum strategy. I did not trade using Mean Reversion, as I was expecting strong movements.
The euro plunged following reports that Germany is seriously considering the possibility of joining a military operation against Iran, just as the British pound did after news that the United Kingdom is supporting the United States in attacks in the Middle East.
The consequences of such a step by Germany, the largest economy in the Eurozone, could be highly unpredictable. On the one hand, this may indicate a consolidation of the West's position regarding Iran's nuclear program and regional policy. On the other hand, direct military involvement in a conflict of this scale carries serious geopolitical risks, including the potential expansion of instability and possible retaliatory measures from Iran. European political circles are refraining from official comments for now, which only increases uncertainty. Official statements are expected soon and should clarify the true intentions of the German government and the potential consequences for European security.
In the second half of the day, traders may focus on the U.S. ISM Manufacturing Index data. This indicator is one of the key measures of the U.S. economy, as it reflects activity in the manufacturing sector, which in turn has a significant impact on overall economic growth. The ISM report includes assessments of indicators such as new orders, production volumes, employment, and prices, making it highly informative for analysts and investors. However, given the current developments in the world, the release of the ISM Manufacturing Index is not expected to trigger increased volatility in the financial markets.
In the case of strong data, I will rely on implementing the Momentum strategy. If there is no market reaction to the data, I will continue using the Mean Reversion strategy.
Momentum Strategy (Breakout) for the Second Half of the Day
For EUR/USD
- Buying on a breakout above 1.1745 may lead to a rise toward 1.1769 and 1.1795.
- Selling on a breakout below 1.1702 may lead to a decline toward 1.1672 and 1.1634.
For GBP/USD
- Buying on a breakout above 1.3384 may lead to a rise toward 1.3416 and 1.3453.
- Selling on a breakout below 1.3347 may lead to a decline toward 1.3312 and 1.3287.
For USD/JPY
- Buying on a breakout above 157.05 may lead to a rise toward 157.40 and 157.69.
- Selling on a breakout below 156.73 may lead to a decline toward 156.33 and 155.96.
Mean Reversion Strategy (Pullback) for the Second Half of the Day
For EUR/USD
- I will look for selling opportunities after a false breakout above 1.1763 and a return below this level.
- I will look for buying opportunities after a false breakout below 1.1680 and a return to this level.
For GBP/USD
- I will look for selling opportunities after a false breakout above 1.3405 and a return below this level.
- I will look for buying opportunities after a false breakout below 1.3310 and a return to this level.
For AUD/USD
- I will look for selling opportunities after a false breakout above 0.7110 and a return below this level.
- I will look for buying opportunities after a false breakout below 0.7051 and a return to this level.
For USD/CAD
- I will look for selling opportunities after a false breakout above 1.3681 and a return below this level.
- I will look for buying opportunities after a false breakout below 1.3634 and a return to this level.
