The dollar continued to strengthen against a number of risk assets following another round of US data and remarks from Federal Reserve speakers.

Yesterday's statements by Fed officials that it is necessary to take a wait-and-see position on rates revived demand for the US dollar, leading to sales of the euro, the pound, and other risk assets. Markets interpreted this signal as confirmation of the central bank's readiness to keep monetary policy restrictive despite growing concerns about a possible slowdown in economic growth and the labor market. Market participants are divided on how events will unfold. Some believe the Fed will take a more cautious stance if economic data begin to point to slowing growth; others think the central bank will stick to its planned strategy to achieve inflation targets.

Today, in the first half of the day, we expect consumer price index figures for Germany and Italy. These data will certainly serve as a barometer of the current state of the European economy and will shape market sentiment. In Germany, inflation is expected to remain below 2.0%, which in turn will help the European Central Bank stick to its plan. Italy's situation may be more complicated. The country's economy, already experiencing certain difficulties, is sensitive to any swings in inflation. If the CPI rises, this could erode purchasing power; in that case, the government will have to balance the need to contain inflation with supporting economic activity.

As for the pound, there are no UK reports today, so GBP/USD may continue to decline. However, one should not rule out speculative dynamics. Large market players, anticipating a possible weakening of the pound, may artificially accelerate selling, thereby strengthening the downtrend. It is important to closely watch trading volumes and order flow dynamics to avoid falling into manipulation traps. Also, keep in mind external factors — any unexpected news from other regions (economic data from Europe, political statements from Asia) can affect FX markets and alter the current situation.

If data match economists' expectations, it is better to act using a Mean Reversion strategy. If the data are much higher or lower than economists' expectations, it is best to use a Momentum strategy.

Momentum Strategy (on breakout):

For EURUSD

• Longs on a breakout of 1.1624 may lead to the euro rising toward 1.1649 and 1.1676;
• Shorts on a breakout of 1.1595 may lead to the euro falling toward 1.1558 and 1.1527;

For GBPUSD

• Longs on a breakout of 1.3392 may lead to the pound rising toward 1.3417 and 1.3441;
• Shorts on a breakout of 1.3363 may lead to the pound falling toward 1.3341 and 1.3312;

For USDJPY

• Longs on a breakout of 158.53 may lead to the dollar rising toward 158.81 and 159.12;
• Shorts on a breakout of 158.28 may lead to dollar sell?offs toward 157.96 and 157.72;

Mean Reversion Strategy (on return):

For EURUSD

• I will look for shorts after a failed breakout above 1.1618 on the return below that level;
• I will look for longs after a failed breakout above 1.1600 on the return to that level;

For GBPUSD

• I will look for shorts after a failed breakout above 1.3396 on the return below that level;
• I will look for longs after a failed breakout above 1.3370 on the return to that level;

For AUDUSD

• I will look for shorts after a failed breakout above 0.6712 on the return below that level;
• I will look for longs after a failed breakout above 0.6696 on the return to that level;

For USDCAD

• I will look for shorts after a failed breakout above 1.3901 on the return below that level;
• I will look for longs after a failed breakout above 1.3879 on the return to that level;