The Euro and the Pound Tried to End the Week on a Positive Note, but Strong U.S. Fundamentals Prevented It

Indeed, in the first half of the day, Germany's Consumer Price Index data came in slightly above economists' forecasts, which supported the euro's upward movement. However, despite this positive news, the single European currency is facing serious challenges in the near term. Inflation is showing signs of slowing, but the European Central Bank remains under pressure from U.S. trade policy, so there's no rush to cut interest rates. In such a complex situation, the ECB will be compelled to strike a balance between combating inflation and supporting the economy. The central bank is expected to continue moderately reducing interest rates while closely monitoring incoming economic data and signals from financial markets.

This morning, no data are scheduled for release in the eurozone, so the EUR/USD pair may remain within a sideways channel. In the absence of official data, traders' and investors' attention will shift to indirect indicators such as ECB officials' speeches, analyst assessments, White House statements, and overall global market sentiment. Additionally, global factors cannot be ruled out—unexpected news from the U.S. or China could indirectly impact the European currency.

As for the pound, selling pressure returned quickly. The recovery observed earlier proved short-lived, giving way to renewed concerns about economic growth and inflation stability. The UK economy is showing signs of a slowdown, triggered by various factors including high interest rates. While recent inflation data indicated some easing, it remains above the Bank of England's target level, limiting the central bank's room for dovish policy moves.

No economic data are expected from the UK today, so downward pressure on the pound may persist.

If the data meet economists' expectations, it's best to rely on the Mean Reversion strategy. If the data deviate significantly—either much stronger or weaker—then the Momentum strategy is more appropriate.

Momentum Strategy (Breakout):

EUR/USD

Buying on a breakout above 1.1654 may lead to a rise in the euro toward 1.1689 and 1.1721;

Selling on a breakout below 1.1615 may lead to a decline in the euro toward 1.1586 and 1.1562.

GBP/USD

Buying on a breakout above 1.3444 may lead to a rise in the pound toward 1.3472 and 1.3502;

Selling on a breakout below 1.3402 may lead to a decline in the pound toward 1.3368 and 1.3335.

USD/JPY

Buying on a breakout above 148.46 may lead to a rise in the dollar toward 148.75 and 149.03;

Selling on a breakout below 148.20 may trigger a sell-off in the dollar toward 147.85 and 147.52.

Mean Reversion Strategy (Pullbacks):

EUR/USD

I will look for sell opportunities after a failed breakout above 1.1641 followed by a return below that level;

I will look for buy opportunities after a failed breakout below 1.1610 followed by a return above that level.

GBP/USD

I will look for sell opportunities after a failed breakout above 1.3428 followed by a return below that level;

I will look for buy opportunities after a failed breakout below 1.3401 followed by a return above that level.

AUD/USD

I will look for sell opportunities after a failed breakout above 0.6522 followed by a return below that level;

I will look for buy opportunities after a failed breakout below 0.6500 followed by a return above that level.

USD/CAD

I will look for sell opportunities after a failed breakout above 1.3727 followed by a return below that level;

I will look for buy opportunities after a failed breakout below 1.3709 followed by a return above that level.