Today, both the euro and the pound were traded using the Momentum strategy, but no significant movements developed. I did not trade anything using the Mean Reversion strategy.
The optimism surrounding Trump's statements and the situation in the Middle East has apparently faded, bringing pressure back onto risk assets. Geopolitical tensions in the Middle East, despite the temporary calm, have not disappeared and continue to remain a smoldering risk capable of reigniting the conflict. Any escalation, even a minor one, could trigger panic in commodity markets, causing another spike in oil and gas prices, which would increase demand for the U.S. dollar and weaken risk-sensitive currencies.
In addition, attention will focus on upcoming economic data, which is unlikely to significantly influence broader market direction but is nevertheless scheduled for release. In particular, the U.S. Pending Home Sales report will be published. This indicator, as an important measure of housing market conditions, often serves as a barometer of consumer confidence and activity in the construction sector. The data is expected to reflect possible trends in supply and demand dynamics and may also influence interest rate expectations.
Additionally, Federal Open Market Committee (FOMC) member Christopher Waller is scheduled to speak later in the day. As one of the key decision-makers on U.S. monetary policy, his comments always attract heightened attention. Traders will closely analyze every word for hints regarding future Federal Reserve actions. However, given the recent changes within the Fed, it is unlikely that we will hear anything fundamentally new.
If the data proves strong, I will rely on the Momentum strategy. If the market shows little reaction to the data, I will continue using the Mean Reversion strategy.
Momentum Strategy (Breakout Trading) for the Second Half of the Day
For EUR/USD
- Buying on a breakout above 1.1635 may lead to euro growth toward 1.1673 and 1.1698;
- Selling on a breakout below 1.1610 may lead to euro weakness toward 1.1592 and 1.1569;
For GBP/USD
- Buying on a breakout above 1.3415 may lead to pound growth toward 1.3445 and 1.3473;
- Selling on a breakout below 1.3385 may lead to pound weakness toward 1.3350 and 1.3310;
For USD/JPY
- Buying on a breakout above 159.13 may lead to dollar growth toward 159.39 and 159.60;
- Selling on a breakout below 158.85 may lead to dollar selling toward 158.57 and 158.28;
Mean Reversion Strategy for the Second Half of the Day
For EUR/USD
- I will look for selling opportunities after a failed breakout above 1.1636 followed by a return below this level;
- I will look for buying opportunities after a failed breakout below 1.1604 followed by a return above this level;
For GBP/USD
- I will look for selling opportunities after a failed breakout above 1.3423 followed by a return below this level;
- I will look for buying opportunities after a failed breakout below 1.3378 followed by a return above this level;
For AUD/USD
- I will look for selling opportunities after a failed breakout above 0.7139 followed by a return below this level;
- I will look for buying opportunities after a failed breakout below 0.7100 followed by a return above this level;
For USD/CAD
- I will look for selling opportunities after a failed breakout above 1.3779 followed by a return below this level;
- I will look for buying opportunities after a failed breakout below 1.3744 followed by a return above this level.
