The demand for risky assets returned yesterday, leading to a relatively strong weakening of the U.S. dollar. This may be due to the U.S. holiday and the lack of significant fundamental reports, so it's too early to draw definitive conclusions.

The euro received short-term support due to the reduced activity in the U.S. market. With no macroeconomic data from the U.S. to provide guidance, traders opted to temporarily transfer their assets into instruments they perceived as more stable, which supported the euro. However, the structural problems of the European economy have not gone away. The risks of rising inflation and ongoing geopolitical tensions continue to pressure the eurozone. Therefore, any attempts at strengthening the euro will likely encounter resistance from market forces focused on long-term fundamentals.

BoE Holds Rates, Offers Support to the Pound

Yesterday, the Bank of England kept its key interest rate unchanged at 4.25%, which significantly supported the pound. However, BoE officials expressed concerns about the deteriorating situation in the UK labor market and the modest economic recovery, particularly amid escalating geopolitical instability. This situation sets a precedent for a possible interest rate cut in August this year.

Today, we expect the figures for the German Producer Price Index and the volume of lending to the private sector in the eurozone. Additionally, we will see secondary reports, which include the changes in the M3 aggregate of the eurozone money supply and the economic bulletin from the European Central Bank. However, the primary focus will be on the Eurozone Consumer Confidence Indicator. A decline in this indicator could reflect households' concerns about the future economic situation, potentially leading to a decrease in consumer spending and putting pressure on economic growth.

Eurozone private sector credit will also be closely monitored. An increase could reflect business optimism and willingness to invest in expanding production, which is a positive economic signal. However, excessive credit growth could lead to economic overheating and asset market bubbles.

Trading Strategies

If the data aligns with economists' expectations, the Mean Reversion strategy should be implemented. However, if the data significantly deviates from these expectations, the Momentum strategy should be employed.

Momentum Strategy (Breakout):

EUR/USD

Buying on a breakout above 1.1535 may lead to euro rising toward 1.1579 and 1.1625.

Selling on a breakout below 1.1515 may lead to euro falling toward 1.1480 and 1.1440.

GBP/USD

Buying on a breakout above 1.3505 may lead to the pound rising toward 1.3533 and 1.3568.

Selling on a breakout below 1.3475 may lead to the pound falling toward 1.3447 and 1.3417.

USD/JPY

Buying on a breakout above 145.60 may lead to the dollar rising toward 145.90 and 146.30.

Selling on a breakout below 145.25 may lead to the dollar dropping toward 144.90 and 144.50.

Mean Reversion Strategy (Pullbacks):

EUR/USD

I will look for selling opportunities after a failed breakout above 1.1539 and a return below that level.

I will look for buying opportunities after a failed breakout below 1.1501 and a return above that level.

GBP/USD

I will look for selling opportunities after a failed breakout above 1.3506 and a return below that level.

I will look for buying opportunities after a failed breakout below 1.3470 and a return above that level.

AUD/USD

I will look for selling opportunities after a failed breakout above 0.6505 and a return below that level.

I will look for buying opportunities after a failed breakout below 0.6473 and a return above that level.

USD/CAD

I will look for selling opportunities after a failed breakout above 1.3715 and a return below that level.

I will look for buying opportunities after a failed breakout below 1.3683 and a return above that level.