Buyers of the euro and the pound have stepped back. While the pound has encountered significant issues following the GDP data, the euro has only experienced a normal correction.
It is evident that as we approach the holiday season, market direction is being influenced more by psychological factors than by economic indicators. Traders are increasingly focused on news, rumors, and overall sentiment, contributing to less volatility in the markets. However, this psychological dynamic can lead to sharp price fluctuations, even when the underlying economic conditions remain stable.
Due to the lack of significant data from the UK and the eurozone during the first half of the day, traders are expected to act cautiously, which may lead to reduced market volatility. This anticipated sideways trading in the euro, pound, and other risk assets will give market participants an opportunity to adapt to current conditions. However, there may be activity from major players looking to take advantage of the uncertainty to adjust their positions. This could lead to temporary sharp movements at certain points during the trading session, but overall, the market is likely to remain within a horizontal channel.
If the data aligns with economists' expectations, it's advisable to use the Mean Reversion Strategy. However, if the data significantly exceeds or falls short of expectations, the Momentum Strategy is recommended.
Mean Reversion Strategy (Reversal):
It is evident that as we approach the holiday season, market direction is being influenced more by psychological factors than by economic indicators. Traders are increasingly focused on news, rumors, and overall sentiment, contributing to less volatility in the markets. However, this psychological dynamic can lead to sharp price fluctuations, even when the underlying economic conditions remain stable.
Due to the lack of significant data from the UK and the eurozone during the first half of the day, traders are expected to act cautiously, which may lead to reduced market volatility. This anticipated sideways trading in the euro, pound, and other risk assets will give market participants an opportunity to adapt to current conditions. However, there may be activity from major players looking to take advantage of the uncertainty to adjust their positions. This could lead to temporary sharp movements at certain points during the trading session, but overall, the market is likely to remain within a horizontal channel.
If the data aligns with economists' expectations, it's advisable to use the Mean Reversion Strategy. However, if the data significantly exceeds or falls short of expectations, the Momentum Strategy is recommended.
Momentum Strategy (Breakout)
For EUR/USD:
- Buy on a breakout above 1.0413, targeting 1.0446 and 1.0476.
- Sell on a breakout below 1.0380, targeting 1.0347 and 1.0308.
For GBP/USD:
- Buy on a breakout above 1.2550, targeting 1.2580 and 1.2611.
- Sell on a breakout below 1.2510, targeting 1.2478 and 1.2432.
For USD/JPY:
- Buy on a breakout above 157.28, targeting 157.70 and 158.12.
- Sell on a breakout below 156.94, targeting 156.60 and 156.19.
Mean Reversion Strategy (Reversal):
For EUR/USD
- Look for sales after an unsuccessful breakout above 1.0410 and a return below this level.
- Look for buys after an unsuccessful breakout below 1.0386 and a return above this level.
For GBP/USD
- Look for sales after an unsuccessful breakout above 1.2543 and a return below this level.
- Look for buys after an unsuccessful breakout below 1.2520 and a return above this level.
For AUD/USD
- Look for sales after an unsuccessful breakout above 0.6249 and a return below this level.
- Look for buys after an unsuccessful breakout below 0.6228 and a return above this level.
For USD/CAD
- Look for sales after an unsuccessful breakout above 1.4392 and a return below this level.
- Look for buys after an unsuccessful breakout below 1.4372 and a return above this level.
