12.06.202613:19 Forex Analysis & Reviews: Level and Target Adjustments for the U.S. Session – June 12

The Australian dollar, Canadian dollar, and British pound were successfully traded today using the Mean Reversion strategy. I traded the yen using a Momentum approach.

German and Italian inflation data fully matched economists' forecasts, showing a decline of 0.2% and an increase of 0.1% respectively, which supported the euro with modest gains in the first half of the day. This cautious optimism in the markets was reinforced by expectations of further interest rate hikes by the European Central Bank. Despite the slight increase, the euro remains under pressure due to ongoing uncertainty in the global economy and the situation in the Middle East.

Looking ahead, we will receive data on the University of Michigan Consumer Sentiment Index and inflation expectations. However, the main focus will remain on further developments in the potential peace agreement between the United States and Iran. Although the details of a possible deal remain unclear, the very fact of active negotiations is already having a noticeable impact on the markets. Any sign of progress in bridging positions could trigger a sharp rally in risk assets, which would support the euro and the pound.

As for economic data, consumer sentiment and inflation expectations will not be ignored. Traders always react sensitively to changes in the macroeconomic environment. The University of Michigan Consumer Sentiment Index is a key indicator measuring consumers' optimism or pessimism regarding their financial situation and the overall state of the economy. High readings typically support the U.S. dollar and its appreciation.

Alongside the sentiment index, special attention will be given to inflation expectations data. Consumers' ability to accurately anticipate future inflation plays an important role. If inflation expectations are high, consumers may accelerate purchases, which paradoxically can further strengthen inflationary pressure.

In the case of strong data releases, 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 breakout above 1.1590 targeting 1.1625 and 1.1645
• Sell breakout below 1.1560 targeting 1.1535 and 1.1500

GBP/USD

• Buy breakout above 1.3424 targeting 1.3452 and 1.3478
• Sell breakout below 1.3388 targeting 1.3359 and 1.3331

USD/JPY

• Buy breakout above 160.25 targeting 160.43 and 160.67
• Sell breakout below 160.00 targeting 159.80 and 159.60

Mean Reversion Strategy (Reversal) for the Second Half of the Day

EUR/USD

• Sell after a failed breakout above 1.1605, on a return below this level
• Buy after a failed breakdown below 1.1558, on a return above this level

GBP/USD

• Sell after a failed breakout above 1.3436, on a return below this level
• Buy after a failed breakdown below 1.3390, on a return above this level

AUD/USD

• Sell after a failed breakout above 0.7066, on a return below this level
• Buy after a failed breakdown below 0.7024, on a return above this level

USD/CAD

• Sell after a failed breakout above 1.3997, on a return below this level
• Buy after a failed breakdown below 1.3967, on a return above this level