Today, only the Australian dollar was traded using the Mean Reversion strategy. I traded the yen using the Momentum approach.
The clear lack of important data from the Eurozone and the UK led to lower volatility. Traders, lacking new drivers for decision-making, preferred to take a wait-and-see approach. This situation is expected to persist until key U.S. data is released.
In the second half of the day, attention will turn to the U.S. GDP change for Q4 2025 and the Core Personal Consumption Expenditures (PCE) index. These releases have the potential to significantly impact the currency market. Particular focus will be on GDP, which provides a comprehensive assessment of the U.S. economy at the end of last year. Whether growth accelerates or slows will directly influence expectations regarding future Federal Reserve monetary policy.
The core PCE index will be equally important. This indicator is the Fed's preferred measure of inflation, as it excludes volatile components such as food and energy. The inflation level reflected in PCE will be a key factor in shaping the regulator's next interest rate decisions. However, it is important to note that the data is for February, so strong market movements are unlikely.
Final data on changes in personal income and spending will add further insight into consumer activity. Rising incomes and a willingness to spend are key drivers of domestic demand and, consequently, economic growth. Strong figures will support the U.S. dollar.
In the case of strong data, 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
EUR/USD
Buy on a breakout above 1.1685, targeting 1.1720 and 1.1745Sell on a breakout below 1.1655, targeting 1.1620 and 1.1590GBP/USD
Buy on a breakout above 1.3415, targeting 1.3442 and 1.3476Sell on a breakout below 1.3390, targeting 1.3370 and 1.3340USD/JPY
Buy on a breakout above 159.09, targeting 159.30 and 159.59Sell on a breakout below 158.85, targeting 158.55 and 158.25Mean Reversion Strategy (Pullback) for the Second Half of the Day
EUR/USD
Look for sells after a false breakout above 1.1685 and a return below this levelLook for buys after a false breakout below 1.1654 and a return to this levelGBP/USD
Look for sells after a false breakout above 1.3415 and a return below this levelLook for buys after a false breakout below 1.3377 and a return to this levelAUD/USD
Look for sells after a false breakout above 0.7052 and a return below this levelLook for buys after a false breakout below 0.7018 and a return to this levelUSD/CAD
Look for sells after a false breakout above 1.3863 and a return below this levelLook for buys after a false breakout below 1.3839 and a return to this level