Today, only the euro was traded using the Mean Reversion strategy. I did not take any trades using Momentum.
Next, data on the U.S. University of Michigan Consumer Sentiment Index and inflation expectations are expected. In addition, the market will monitor developments in the geopolitical situation in the Middle East. If the data comes in strong, demand for the dollar will quickly return.
It is worth noting that the above macroeconomic indicators have a significant impact on the dynamics of the U.S. currency. Consumer sentiment reflects Americans' confidence in the economy, their willingness to spend, and consequently to stimulate economic growth. High index readings typically indicate stability and positive expectations, which in turn support demand for dollar-denominated assets. At the same time, inflation expectations play an equally important role. If consumers expect rising prices, this may prompt the Federal Reserve to tighten monetary policy, including raising interest rates.
If the data is strong, I will rely on 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:
- Buy on a breakout above 1.1695, targeting 1.1720 and 1.1750
- Sell on a breakout below 1.1680, targeting 1.1650 and 1.1620
For GBP/USD:
- Buy on a breakout above 1.3495, targeting 1.3515 and 1.3545
- Sell on a breakout below 1.3460, targeting 1.3446 and 1.3416
For USD/JPY:
- Buy on a breakout above 159.83, targeting 160.02 and 160.24
- Sell on a breakout below 159.60, targeting 159.36 and 159.13
Mean Reversion Strategy (Pullback) for the Second Half of the Day
For EUR/USD:
- Look to sell after a false breakout above 1.1697 and a return below this level
- Look to buy after a false breakout below 1.1672 and a return to this level
For GBP/USD:
- Look to sell after a false breakout above 1.3490 and a return below this level
- Look to buy after a false breakout below 1.3455 and a return to this level
For AUD/USD:
- Look to sell after a false breakout above 0.7142 and a return below this level
- Look to buy after a false breakout below 0.7115 and a return to this level
For USD/CAD:
- Look to sell after a false breakout above 1.3705 and a return below this level
- Look to buy after a false breakout below 1.3675 and a return to this level
