21.05.202612:40 Forex Analysis & Reviews: Level and Target Adjustments for the U.S. Session – May 21st

Today, trades in the euro and the pound were executed using the Mean Reversion strategy. I did not trade using the Momentum strategy.

Today's preliminary eurozone PMI data for May came in mixed. Similar reports from the UK were also disappointing. The eurozone Manufacturing PMI declined to 51.4 from April's 52.2, falling short of the market forecast of 51.8. Formally, the sector remains in expansion territory, but the trend is becoming concerning. The UK Manufacturing PMI held steady at April's level of 53.7 versus the forecast of 53.0, which in itself is a positive signal. However, that was where the positive news ended. The Services PMI dropped sharply from April's 52.7 to 47.9, which is quite negative for the British economy.

Attention will now shift to US weekly initial jobless claims data and building permits statistics. These indicators are among the key measures of the condition of the US labor market and construction sector, both of which significantly influence broader economic trends. Initial jobless claims are expected to remain largely unchanged from the previous week, signaling continued strength in the labor market. At the same time, building permits data may present a mixed picture, reflecting both ongoing construction activity in some regions and potential slowdowns associated with higher mortgage interest rates.

Reports on the US Manufacturing PMI and Services PMI are also expected. These indices, based on surveys of purchasing managers, provide insight into business expectations and current economic activity. Strong readings are anticipated, signaling optimism and growth, which could provide solid support for the US dollar.

If the data comes in strong, I will rely on the Momentum strategy. If the market shows little reaction to the data, I will continue using the Mean Reversion strategy.

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

For EUR/USD

• A breakout above 1.1635 may lead to euro growth toward 1.1659 and 1.1698;
• A breakout below 1.1609 may lead to euro weakness toward 1.1585 and 1.1555;

For GBP/USD

• A breakout above 1.3450 may lead to pound growth toward 1.3475 and 1.3499;
• A breakout below 1.3420 may lead to pound weakness toward 1.3380 and 1.3344;

For USD/JPY

• A breakout above 159.13 may lead to dollar growth toward 159.39 and 159.60;
• A breakout below 158.85 may trigger dollar selling toward 158.57 and 158.28;

Mean Reversion Strategy for the Second Half of the Day

For EUR/USD

• I will look for selling opportunities after a false breakout above 1.1647 followed by a return below this level;
• I will look for buying opportunities after a false breakout below 1.1595 followed by a return above this level;

For GBP/USD

• I will look for selling opportunities after a false breakout above 1.3453 followed by a return below this level;
• I will look for buying opportunities after a false breakout below 1.3413 followed by a return above this level;

For AUD/USD

• I will look for selling opportunities after a false breakout above 0.7155 followed by a return below this level;
• I will look for buying opportunities after a false breakout below 0.7107 followed by a return above this level;

For USD/CAD

• I will look for selling opportunities after a false breakout above 1.3775 followed by a return below this level;
• I will look for buying opportunities after a false breakout below 1.3752 followed by a return above this level.