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The euro and the pound showed high volatility at the beginning of the week but remained trapped within trading channels. Although the U.S. dollar maintained an advantage, it's still too early to talk about a continuation of its bullish trend.
Yesterday's decline in the EUR/USD pair, following the release of strong ISM data for the U.S. services sector, reflected renewed dollar strength amid expectations that the Federal Reserve will maintain its hawkish monetary stance this week. The ISM index, which gauges business activity in the services sector, exceeded analysts' forecasts, signaling the resilience of the U.S. economy despite ongoing concerns about a potential recession in the year's second half.
In the first half of today, traders are awaiting the release of the Eurozone services PMI, the composite PMI, and producer price index (PPI) data. These indicators often significantly impact forex dynamics and trader sentiment, reflecting the economic landscape and inflationary pressures.
The services PMI, in particular, helps assess business activity in the key services sector of the European economy. An increase in this index typically indicates rising production volumes and demand, which can support the euro. Conversely, a drop in the index suggests slowing economic activity and potential currency weakness. Combining manufacturing and services data, the composite PMI offers a broader snapshot of the eurozone's economic health.
Later in the day, we will also get the producer price index (PPI), which reflects price changes for goods and services purchased by producers. While a rise in PPI may point to growing inflationary pressures, it is unlikely to push the European Central Bank toward tightening monetary policy.
If the data matches economists' expectations, acting based on the Mean Reversion strategy is better. The Momentum strategy is recommended if the data significantly exceeds or falls short of expectations.
Buying on a breakout above 1.1330 may lead to euro rising toward 1.1350 and 1.1380
Selling on a breakout below 1.1305 may lead to euro falling toward 1.1260 and 1.1217
Buying on a breakout above 1.3310 may lead to pound rising toward 1.3341 and 1.3371
Selling on a breakout below 1.3275 may lead to pound falling toward 1.3240 and 1.3200
Buying on a breakout above 144.05 may lead to dollar rising toward 144.46 and 144.85
Selling on a breakout below 143.63 may lead to dollar dropping toward 143.17 and 142.79
I will look to sell after a failed breakout above 1.1344 followed by a return below this level
I will look to buy after a failed breakout below 1.1283 followed by a return above this level
I will look to sell after a failed breakout above 1.3318 followed by a return below this level
I will look to buy after a failed breakout below 1.3261 followed by a return above this level
I will look to sell after a failed breakout above 0.6478 followed by a return below this level
I will look to buy after a failed breakout below 0.6440 followed by a return above this level
I will look to sell after a failed breakout above 1.3852 followed by a return below this level
I will look to buy after a failed breakout below 1.3803 followed by a return above this level
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