FX.co ★ EUR/USD and GBP/USD Strategies for Beginner Traders – September 29

Demand for the U.S. dollar has not disappeared, keeping pressure on the euro and the British pound.

There was no new data from the eurozone today, which has already become a familiar pattern in recent days. When the economic calendar for the region remains empty for several days in a row, euro buyers simply have no arguments for active trading. In such a situation, the pair depends entirely on what is happening on the U.S. side, and any unexpected development there can move EUR/USD much more strongly than an average day with moderate eurozone data.

In Britain, however, a set of lending and money-supply data was released in the morning, and the figures were mixed. Mortgage approvals fell to 54,900 from the expected 58,000. At the same time, net lending to individuals increased more than forecast, rising by 6.9% compared with the expected 6.2%. This indicates that consumers continue to borrow even amid high interest rates, suggesting that the economy is not losing momentum. M4 money supply also deserves attention: growth amounted to 0.4% versus a forecast of 0.1%. The amount of money in the system is increasing faster than expected, which is an argument for those at the Bank of England who support maintaining a restrictive policy. Taken together, the data provide no reason to expect a change in the central bank's policy direction.

The main events in the second half of the day are U.S. economic data and two speeches by Federal Reserve officials. The housing price index will be released as an important indicator of the health of the consumer sector, because when home prices rise, people feel wealthier and are more willing to spend money. This will be followed by the U.S. Consumer Confidence Index, a survey that shows how optimistic Americans are about their financial situation and their willingness to spend. If both indicators come in above forecasts, the market will interpret this as a sign of a strong economy, increasing expectations of an imminent tightening of Fed policy. This would support the dollar while putting pressure on the euro and pound.

Federal Reserve officials Michelle Bowman and Christopher Waller will also speak today. Both have recently expressed relatively firm views, and if they maintain a similar tone today while the economic data provide support, pressure on both pairs could intensify toward the end of the session.

Momentum

For the euro, the pair is trading between two breakout levels, and until signals come from Washington, the movement may remain subdued. A break above 1.1360 opens the way toward 1.1386 and then 1.1410. This scenario would be supported if Bowman and Waller sound more dovish than expected or if the economic data disappoint. The reverse move through 1.1335, with targets at 1.1312 and 1.1288, appears more likely in my view if strong data coincide with the Fed's usual hawkish rhetoric.

The pound is also confined between two levels. A break above 1.3250 would open the way toward 1.3284 and 1.3319, and the pound would benefit here either from weak U.S. data or unexpectedly dovish comments from Fed officials. If the U.S. session follows the tone of yesterday's rhetoric, a break below 1.3210 toward 1.3173 and 1.3137 appears more likely. Yesterday's session already showed how quickly positive sentiment toward the pound can disappear when the dollar receives its own support.

Mean Reversion

For the euro, the upper reference level is 1.1360 and the lower level is 1.1321. The range is noticeably wider than yesterday's, providing somewhat more room for maneuver. A move above 1.1360 followed by a quick return below it is a scenario to consider if the news flow remains neutral in the first half of the day and the pair lacks sufficient momentum for a sustained move higher. A rebound from 1.1321 is a scenario for those who believe the market is temporarily overselling the euro and that a correction is likely, particularly before the evening data are released.

For the pound, the upper boundary is 1.3250 and the lower boundary is 1.3211. The range between them is approximately 40 pips, providing moderate potential in both directions. A reversal from 1.3250 would be reasonable if buying activity during the day quickly runs out of momentum without support from economic data. A rebound from 1.3211 is possible if sellers become exhausted and the market awaits a reaction to the evening data, but positions held during a move toward the U.S. session should always be managed cautiously, as the figures can quickly change market expectations.