30.07.202614:07 Forex Analysis & Reviews: Level and Target Adjustments for the U.S. Session – July 30

The euro and the British pound both performed well today using the Mean Reversion strategy. I did not execute any trades based on the Momentum strategy.

The euro posted strong gains today following the release of second-quarter GDP data for Germany and the eurozone. According to Eurostat, the eurozone economy expanded by 0.4% in the second quarter, significantly exceeding economists' expectations. GDP measures the pace of economic growth and is one of the key indicators of economic health, so the stronger-than-expected reading reinforced market confidence in the region's resilience, supporting the euro.

The positive surprise was particularly significant because it came at a time when many market participants had expected weaker figures. As a result, the common currency received strong support. The strong data strengthened the case for a more restrictive monetary policy stance by the European Central Bank (ECB), increasing the euro's attractiveness and pushing EUR/USD higher. Whether the rally can be sustained will depend on whether confidence in the region's economic recovery persists, but the immediate market reaction to the report was clearly positive.

The pound also posted modest gains after the Bank of England kept its benchmark interest rate unchanged at 3.75%. However, the 6–3 voting split highlighted growing hawkish sentiment within the Monetary Policy Committee, with Catherine Mann joining those who voted in favor of a rate hike. Bank of England Governor Andrew Bailey explained that the decision reflected insufficient evidence of persistent second-round inflationary effects despite global uncertainty and elevated inflation expectations.

The Committee also published updated forecasts, projecting inflation to peak at 3.2% by the end of the year before returning to the 2% target in 2027. Markets now price the probability of a September rate hike at slightly above 50%. The decision followed a similar move by the Federal Reserve, reflecting central banks' cautious approach amid continued volatility in oil prices.

During today's U.S. trading session, markets will focus on a busy slate of U.S. economic data, including second-quarter GDP, the Core Personal Consumption Expenditures (PCE) Price Index, and personal income and spending. GDP measures the pace of economic growth, while the Core PCE Price Index is the Federal Reserve's preferred inflation gauge because it excludes volatile components. Meanwhile, the income and spending figures provide insight into the financial health of consumers, who remain the primary driver of the U.S. economy. Together, these releases will provide a comprehensive picture of economic conditions and could have a direct impact on interest rate expectations.

Only exceptionally strong data are likely to restore demand for the U.S. dollar, which has recently lost some of its momentum. For the euro and the pound, this would increase the risk of a pullback, as stronger-than-expected U.S. data could boost the dollar and weigh on EUR/USD and GBP/USD. Conversely, weaker data would likely extend pressure on the U.S. currency and provide additional room for both European currencies to appreciate. Ultimately, the market reaction will depend on how significantly the data exceed or fall short of expectations.

If the U.S. data come in strong, I will rely on the Momentum strategy. If the market shows little or no reaction to the releases, I will continue using the Mean Reversion strategy.

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

EUR/USD

• A breakout above 1.1482 could send the euro toward 1.1501 and 1.1527.
• A breakout below 1.1460 could push the euro down toward 1.1436 and 1.1412.

GBP/USD

• A breakout above 1.3393 could lift the pound toward 1.3421 and 1.3451.
• A breakout below 1.3362 could drive the pound lower toward 1.3334 and 1.3304.

USD/JPY

• A breakout above 163.18 could lift the U.S. dollar toward 163.48 and 163.76.
• A breakout below 162.80 could trigger further selling, with downside targets at 162.60 and 162.30.

Mean Reversion Strategy for the Second Half of the Day

EUR/USD

• I will look for short positions after a false breakout above 1.1499, followed by a move back below this level.
• I will look for long positions after a false breakout below 1.1452, followed by a recovery back above this level.

GBP/USD

• I will look for short positions after a false breakout above 1.3414, followed by a move back below this level.
• I will look for long positions after a false breakout below 1.3353, followed by a recovery back above this level.

AUD/USD

• I will look for short positions after a false breakout above 0.6995, followed by a move back below this level.
• I will look for long positions after a false breakout below 0.6965, followed by a recovery back above this level.

USD/CAD

• I will look for short positions after a false breakout above 1.4058, followed by a move back below this level.
• I will look for long positions after a false breakout below 1.4027, followed by a recovery back above this level.