Everything changed quickly after Trump concocted a new story about Iran and negotiations, which the markets once again believed.
Yesterday's decision by President Trump to postpone strikes on Iranian power plants and energy infrastructure for five days, while also stating that "productive negotiations" were taking place between the US and Iran, caused significant turmoil in global financial markets. This news led to a sharp decline in the US dollar. Investors, who had previously hedged their risks in anticipation of escalating conflict, hurried to sell the dollar, redirecting their investments toward riskier but potentially more profitable assets.
The announcement of successful negotiations became an unexpected catalyst for a shift in market sentiment. The tone adopted by President Trump suggested a shift from confrontational rhetoric to a diplomatic resolution, although Iranian authorities claimed that no negotiations were underway. It seems clear that this was intended to lower energy prices, which, it should be noted, worked, albeit only temporarily.
Today's economic calendar for the Eurozone and the UK is quite busy, offering traders important benchmarks to assess the state of the largest economies on the European continent. The first half of the day will be filled with the publication of key business activity indices (PMIs) for the manufacturing and services sectors, as well as their composite index. These indicators serve as a barometer of business sentiment, reflecting production levels, new orders, employment, and pricing pressure. Production data is expected to show a sharp decline amid the war in the Middle East. The composite PMI index will provide the most complete picture of the current trajectory for the entire European economy.
Attention will also be focused on the speech of Bundesbank President Joachim Nagel. Given the prevailing inflationary uncertainty and the complex challenges facing the European economy, any remarks from the head of one of the most influential central banks in the Eurozone will be thoroughly analyzed for new signals regarding monetary policy. Investors will be looking for hints about the ECB's future steps on interest rates, as well as its outlook on economic growth and the risks posed by geopolitical tensions and energy security.
In the UK, similar PMI indices are expected, so a significant reaction from the pound is anticipated.
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' expectations, it is best to utilize the Momentum strategy.
Momentum Strategy (Breakout): For the EUR/USD Pair Buy on a breakout at 1.1590, which could lead to an increase in the euro to around 1.1614 and 1.1638; Sell on a breakout at 1.1570, which could lead to a decline in the euro to around 1.1550 and 1.1525; For the GBP/USD Pair Buy on a breakout at 1.3410, which could lead to an increase in the pound to around 1.3440 and 1.3475; Sell on a breakout at 1.3380, which could lead to a decline in the pound to around 1.3350 and 1.3325; For the USD/JPY Pair Buy on a breakout at 158.80, which could lead to a rise in the dollar to around 159.18 and 159.47; Sell on a breakout at 158.57, which could lead to a decline in the dollar to around 158.28 and 157.93; Mean Reversion Strategy (Return):