Demand for the US dollar has quickly returned, and amid a stalemate in the Middle East, the market is reacting impulsively to any news.
Today's morning session promises to be a turning point for the euro's future direction. The focus will be on indicators characterizing the state of the Eurozone's largest economy—Germany. According to forecasts, key figures for the consumer price index will be released in the first half of the day. This data is of primary importance, as it directly reflects the level of inflation and significantly impacts price stability and, consequently, the European Central Bank's further steps in monetary policy.
Simultaneously with the inflation data, the ZEW Research Institute will publish its indicators. Two important metrics reflecting expectations and assessment of the current economic situation in Germany will be presented. The ZEW Business Sentiment Index is designed to signal how German entrepreneurs evaluate the prospects for the economy in the near future. Positive dynamics in this index can indicate a growth in business optimism and confidence, while a decline may reflect growing concerns.
Similar indicators will also be published for the Eurozone, which will certainly impact the currency market.
For the UK, no reports are scheduled today, so it is likely that pressure on the British pound will continue within the bearish market observed since the end of yesterday.
If the data aligns with economists' expectations, it is better to act using the Mean Reversion strategy. If the data is significantly above or below economists' expectations, it is best to use the Momentum strategy.
Momentum Strategy (Breakout):For the EUR/USD Pair:Long positions on a breakout above the 1.1770 level may lead to a rise in the euro to around 1.1796 and 1.1815.Short positions on a breakout below the 1.1750 level may lead to a decline in the euro to around 1.1725 and 1.1701.For the GBP/USD Pair:Longs on a breakout above the 1.3585 level may lead to a rise in the pound to around 1.3615 and 1.3650.Shorts on a breakout below the 1.3565 level may lead to a decline in the pound to around 1.3540 and 1.3514.For the USD/JPY Pair:Longs on a breakout above the 157.40 level may lead to a rise in the dollar to around 157.70 and 157.99.Shorts on a breakout below the 157.00 level may lead to a sell-off of the dollar to around 156.73 and 155.96.Mean Reversion Strategy (Return):