After significant geopolitical upheavals, the currency market is gradually stabilizing. The US dollar attempted to show growth against a range of risk assets yesterday, but this effort did not succeed.
Today promises to be eventful for financial markets, particularly in Europe. The first half of the day will be marked by the publication of key macroeconomic indicators that could significantly influence the dynamics of the euro and quotes of European assets. Traders will primarily focus on the final GDP growth data for the Eurozone in the fourth quarter of 2025. These figures will provide a more accurate picture of the currency bloc's economic state at the end of last year, allowing an assessment of growth or slowdown rates and the identification of potential sectoral imbalances. A growth of 0.3% relative to the third quarter and 1.4% year-on-year is expected.
In addition to the GDP data, figures for changes in employment levels in the Eurozone will be released. This information is among the most sensitive indicators of the labor market's condition and, consequently, of overall economic well-being. The employment report will help assess how well the economy is creating new jobs, which directly affects consumer demand and inflation.
As for the pound, only one significant report is ahead—the house price index from Halifax. This index, published by one of the largest mortgage lenders in the country, has traditionally served as a barometer of the UK property market. It reflects housing price trends by analyzing mortgage applications and recent transactions. The data from Halifax allows the market to evaluate current trends in supply and demand, as well as the overall consumer sentiment towards real estate investments. If the data aligns with economists' forecasts, it is unlikely the pound will react.
If the data aligns with economists' expectations, it is better to act based on the Mean Reversion strategy. If the data significantly exceeds or falls short of economists' forecasts, the Momentum strategy would be preferred.
Momentum Strategy (Breakout):
For the EUR/USD Pair
Long positions on a breakout of 1.1625 may lead to an increase in the euro towards 1.1660 and 1.1700;
Short positions on a breakout of 1.1600 may lead to a decline in the euro towards 1.1575 and 1.1535;
For the GBP/USD Pair
Longs on a breakout of 1.3380 may lead to a rise in the pound towards 1.3400 and 1.3423;
Shorts on a breakout of 1.3344 may lead to a drop in the pound towards 1.3306 and 1.3275;
For the USD/JPY Pair
Longs on a breakout of 157.85 may lead to a rise in the dollar towards 158.15 and 158.48;
Shorts on a breakout of 157.60 may lead to a dollar sell-off towards 157.35 and 157.05;
Mean Reversion Strategy (Retracement):
For the EUR/USD Pair
I will look for shorts after a failed breakout above 1.1627, targeting a return below this level;
I will look for longs after a failed breakout above 1.1599, targeting a return to this level;
For the GBP/USD Pair
I will look for shorts after a failed breakout above 1.3379, targeting a return below this level;
I will look for longs after a failed breakout above 1.3347, targeting a return to this level;
For the AUD/USD Pair
I will look for shorts after a failed breakout above 0.7055, targeting a return below this level;
I will look for longs after a failed breakout above 0.7014, targeting a return to this level;
For the USD/CAD Pair
I will look for shorts after a failed breakout above 1.3673, targeting a return below this level;
I will look for longs after a failed breakout above 1.3645, targeting a return to this level;
