The Euro Was Slightly More Fortunate Than the Pound, Which Came Under Pressure from Weak Labor Market Reports and Resumed Its Decline After Progress in U.S.-China Negotiations

Trade negotiations between China and the United States are taking new shape, and according to yesterday's statements from both sides, consensus was reached on key issues. This breakthrough, the result of intense discussions, brings hope for the stabilization of global markets and a reduction in risks to the global economy. Special attention was given to the supply of rare earth metals to the U.S. and the lowering of trade tariffs on various Chinese goods. The agreements reached—though not disclosed in detail—must still be approved by the leaders of both countries. However, despite the optimistic rhetoric, skeptics warn against excessive euphoria. Previous negotiation rounds have also resulted in promises that were never fulfilled. A key success factor will be both sides' ability to honor their commitments and demonstrate a willingness to compromise in the future.

Today, apart from a speech by European Central Bank representative Philip Lane, there are no reports. Confirmation of market participants' expectations regarding a pause in interest rate cuts in the eurozone could support the euro. Without macroeconomic data, market attention will be focused on Lane's rhetoric, as he will likely try to balance the need to curb inflation with the need to sustain economic growth. His remarks may shed light on how confident the ECB is in reaching its 2% inflation target, as stated during the last policy meeting. If Lane confirms expectations for a rate cut pause, it may signal that the ECB considers current rate levels sufficient to combat inflation. In this case, the euro could strengthen against other currencies, as investors may view it as a more attractive yield-bearing asset.

If the data matches economists' expectations, acting based on a Mean Reversion strategy is better. If the data turns out to be significantly higher or lower than expected, the Momentum strategy is best.

Momentum Strategy (Breakout):

EUR/USD

Buying a breakout above 1.1425 may lead to a rise toward 1.1459 and 1.1492

Selling a breakout below 1.1400 may lead to a decline toward 1.1361 and 1.1314

GBP/USD

Buying a breakout above 1.3495 may lead to a rise toward 1.3520 and 1.3560

Selling a breakout below 1.3470 may lead to a fall toward 1.3451 and 1.3415

USD/JPY

Buying a breakout above 145.20 may lead to a rise toward 145.60 and 145.92

Selling a breakout below 144.90 may lead to a decline toward 144.50 and 144.05

Mean Reversion Strategy (Pullbacks):

EUR/USD

Look for sell opportunities after a failed breakout above 1.1435, returning below that level

Look for buy opportunities after a failed breakout below 1.1401, returning back above it

GBP/USD

Look for sell opportunities after a failed breakout above 1.3505, returning below that level

Look for buy opportunities after a failed breakout below 1.3460, returning back above it

AUD/USD

Look for sell opportunities after a failed breakout above 0.6530, returning below that level

Look for buy opportunities after a failed breakout below 0.6498, returning back above it

USD/CAD

Look for sell opportunities after a failed breakout above 1.3690, returning below that level

Look for buy opportunities after a failed breakout below 1.3665, returning back above it