The euro, the pound, and other risk assets have strengthened on positive news about the Middle East.
Good news regarding preparations for negotiations aimed at ending the war between the U.S., Iran, Israel, and Lebanon has undoubtedly supported risk assets. This news has been a breath of fresh air amid prolonged geopolitical tensions that have pressured the global economy and energy markets for a long time. Expectations for conflict resolution have generated a wave of optimism, which in turn has reflected on financial markets. Negotiations between the U.S. and Iran are expected on April 11, while discussions between Israel and Lebanon are scheduled for April 14. The reduction in geopolitical risks further diminishes demand for safe havens such as the U.S. dollar, thereby stimulating capital inflows into higher-yielding but more volatile assets, including the euro and the British pound.
Today, traders' attention will be focused on the release of macroeconomic indicators from the Eurozone. In particular, data on the consumer price index (CPI) in Germany is expected, which is one of the main indicators of inflation trends in Europe's largest economy. High inflation levels could put pressure on the European Central Bank, pushing it towards a tighter monetary policy, which, in turn, could affect the value of the euro.
Simultaneously, the market is awaiting data on changes in Italy's industrial production. This indicator reflects the state of the country's manufacturing sector, which plays a significant role in the Eurozone economy.
There are no reports scheduled for the United Kingdom, so it is likely that the GBP/USD pair will trade in a narrow sideways channel during the first half of the day.
If the data aligns with economists' expectations, it is best to act based on the Mean Reversion strategy. If the data is significantly above or below economists' expectations, the Momentum strategy is preferable.
Momentum Strategy (Breakout):
For the EUR/USD Pair:
Buy on a breakout of the level 1.1705, which may lead to a rise of the euro toward 1.1730 and 1.1765;
Sell on a breakout of the level 1.1680, which may lead to a decline of the euro toward 1.1650 and 1.1620;
For the GBP/USD Pair:
Buy on a breakout of the level 1.3430, which may lead to a rise of the pound toward 1.3454 and 1.3481;
Sell on a breakout of the level 1.3403, which may lead to a decline of the pound toward 1.3377 and 1.3343;
For the USD/JPY Pair:
Buy on a breakout of the level 159.30, which may lead to a rise of the dollar toward 159.55 and 159.75;
Sell on a breakout of the level 159.10, which may lead to a sell-off of the dollar toward 158.85 and 158.55;
Mean Reversion Strategy (Retracement):
For the EUR/USD Pair:
Sell looking for a failed breakout above 1.1700 on a return below this level;
Buy looking for a failed breakout below 1.1680 on a return to this level;
For the GBP/USD Pair:
Sell looking for a failed breakout above 1.3434 on a return below this level;
Buy looking for a failed breakout below 1.3412 on a return to this level;
For the AUD/USD Pair:
Sell looking for a failed breakout above 0.7085 on a return below this level;
Buy looking for a failed breakout below 0.7061 on a return to this level;
For the USD/CAD Pair:
Sell looking for a failed breakout above 1.3832 on a return below this level;
Buy looking for a failed breakout below 1.3816 on a return to this level;
