17.12.202513:26 Forex Analysis & Reviews: Level and Target Adjustments for the U.S. Session – December 17th

Today, only the Canadian dollar was traded using the Mean Reversion strategy. I traded the British pound and the Japanese yen using the Momentum strategy.

Weak IFO data from Germany and a decline in eurozone inflation limited the euro's upward potential. The British pound, however, was hit much harder after news that prices fell in November instead of rising, which led to a sharp decline in GBP/USD. During the U.S. session, the focus will be on speeches by FOMC member John Williams and FOMC member Raphael Bostic. It will be quite interesting to see how they comment on yesterday's U.S. labor market data and what tone they take toward tomorrow's inflation figures.

Traders will closely watch for any hints of a possible change in the Fed's rhetoric regarding the outlook for interest rates. Uncertainty surrounding inflation on the one hand, and signs of a slowing labor market on the other, place the regulator in a difficult dilemma. The market is waiting to see whether FOMC representatives will interpret the recent labor market data as a reason for a more cautious approach to easing monetary policy. Given that the labor market is traditionally a key factor in the Fed's interest-rate decisions, comments from Williams and Bostic could have a significant impact on investor sentiment and movements in the currency market.

In the case of strong data, I will rely on implementing 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

For EUR/USD

• Buying on a breakout above 1.1725 could lead to a rise toward 1.1750 and 1.1775;
• Selling on a breakout below 1.1705 could lead to a decline toward 1.1680 and 1.1640.

For GBP/USD

• Buying on a breakout above 1.3335 could lead to a rise toward 1.3360 and 1.3385;
• Selling on a breakout below 1.3315 could lead to a decline toward 1.3285 and 1.3260.

For USD/JPY

• Buying on a breakout above 155.65 could lead to a rise toward 156.15 and 156.55;
• Selling on a breakout below 155.40 could lead to selling pressure toward 155.20 and 154.80.

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

For EUR/USD

• I will look for sell opportunities after a failed break above 1.1740, followed by a move back below this level;
• I will look for buy opportunities after a failed break below 1.1692, followed by a return to this level.

For GBP/USD

• I will look for sell opportunities after a failed break above 1.3350, followed by a move back below this level;
• I will look for buy opportunities after a failed break below 1.3275, followed by a return to this level.

For AUD/USD

• I will look for sell opportunities after a failed break above 0.6633, followed by a move back below this level;
• I will look for buy opportunities after a failed break below 0.6610, followed by a return to this level.

For USD/CAD

• I will look for sell opportunities after a failed break above 1.3789, followed by a move back below this level;
• I will look for buy opportunities after a failed break below 1.3760, followed by a return to this level.