10.08.202613:06 Forex Analysis & Reviews: Level and Target Adjustments for the U.S. Session – August 10

Due to low market volatility, only the Canadian dollar could be traded today using the Mean Reversion strategy, but even there, I did not get the favorable reversal move I was waiting for. I did not trade anything using the Momentum strategy.

The eurozone investor confidence indicator from Sentix came in above economists' forecasts, rising by 0.9 points. This allowed the euro to recover some ground in the first half of the day, but it did not lead to any significant market moves. The indicator reflects investors' assessment of the region's current economic conditions and outlook and serves as an early gauge of market sentiment. Therefore, its improvement supported the single currency and provided it with short-term support. As we noted earlier, this indicator carries relatively little weight, and its impact on the exchange rate is traditionally limited. That is why the report did not lead to a continuation of the broader uptrend. The improvement in investor sentiment gave the euro only a modest boost, which was insufficient to develop a sustained upward move, and EUR/USD was limited to a moderate rebound.

No significant U.S. economic data are scheduled for the second half of the day, so risk assets still have a good chance of continuing to rise against the dollar. The absence of new data means that the market will have no new catalysts for reassessing positions, while the initiative is likely to remain with the bullish sentiment that recently emerged following the weak U.S. labor-market report. Recall that the disappointing nonfarm payrolls figure undermined expectations of a hawkish Federal Reserve policy and caused the dollar to fall sharply, setting the tone for subsequent trading.

This backdrop is favorable for the euro and the pound. As long as the dollar remains under pressure and the data provide no catalyst for a recovery, both European currencies have room to extend their gains. Both EUR/USD and GBP/USD may maintain their upward bias, with their further movement determined primarily by overall risk appetite, while no additional pair-specific catalysts are expected during the second half of the day.

If the economic data are strong, I will rely on the Momentum strategy. If the market does not react to the data, I will continue to use the Mean Reversion strategy.

Momentum Strategy (Breakout) for the Second Half of the Day

For EUR/USD

• Buying on a breakout above 1.1567 may lead to a rise in the euro toward 1.1592 and 1.1620.
• Selling on a breakout below 1.1541 may lead to a decline in the euro toward 1.1520 and 1.1502.

For GBP/USD

• Buying on a breakout above 1.3505 may lead to a rise in the pound toward 1.3539 and 1.3581.
• Selling on a breakout below 1.3468 may lead to a decline in the pound toward 1.3435 and 1.3401.

For USD/JPY

• Buying on a breakout above 158.85 may lead to a rise in the dollar toward 159.13 and 159.39.
• Selling on a breakout below 158.60 may lead to a decline in the dollar toward 158.28 and 157.99.

Mean Reversion Strategy (Return to Level) for the Second Half of the Day

For EUR/USD

• I will look for sell positions after a failed break above 1.1571, followed by a return below this level.
• I will look for buy positions after a failed break below 1.1541, followed by a return to this level.

For GBP/USD

• I will look for sell positions after a failed break above 1.3511, followed by a return below this level.
• I will look for buy positions after a failed break below 1.3475, followed by a return to this level.

For AUD/USD

• I will look for sell positions after a failed break above 0.7080, followed by a return below this level.
• I will look for buy positions after a failed break below 0.7056, followed by a return to this level.

For USD/CAD

• I will look for sell positions after a failed break above 1.3955, followed by a return below this level.
• I will look for buy positions after a failed break below 1.3928, followed by a return to this level.