Demand for Risk Assets Remained Strong, and the U.S. Dollar Weakened Further After Powell's Speech, Which Did Not Rule Out the Possibility of an Earlier Rate Cut in the U.S.

Although Federal Reserve Chair Jerome Powell declined yesterday to comment on the potential for interest rate cuts, he reiterated that policymakers need more information to determine whether tariff hikes will accelerate inflation. The market interpreted this rhetoric as moderately dovish, leading to a weakening dollar and a rise in risk assets. Traders took Powell's remarks as a signal that the Fed remains flexible and ready to respond promptly to incoming data, especially regarding inflation. However, it is essential to remember that the Fed also emphasized its commitment to fighting inflation and is prepared to maintain a restrictive policy if needed. This balance between readiness to ease and the potential for tightening creates uncertainty in the market, requiring increased investor vigilance.

Today's absence of fundamental data allows EUR/USD to consolidate near monthly highs. This calm period will likely serve as a foundation for further upward movement as the market digests recent events and forms new expectations. The current technical picture indicates prevailing bullish sentiment, but sustained growth will require the pair to break through several key resistance levels. Securing positions above those levels would confirm buyer strength and open the path for further advancement.

There are also no fundamental releases out of the UK today, so the market's focus will likely shift to the speech by Bank of England Deputy Governor for Monetary Policy Clare Lombardelli. The market will closely analyze her comments on the current economic situation and monetary policy outlook for clues on future BoE actions. Lombardelli's speech could trigger volatility in the pound. If she expresses concern about inflation persistence and hints at the possibility of further interest rate cuts, this may put pressure on the British currency.

If the data matches economists' expectations, acting based on the Mean Reversion strategy is best. If the data is significantly above or below expectations, the Momentum strategy is preferable.

Momentum Strategy (Breakout):

EUR/USD

Buying on a breakout above 1.1628 may lead to a rise toward 1.1660 and 1.1699

Selling on a breakout below 1.1600 may lead to a fall toward 1.1570 and 1.1540

GBP/USD

Buying on a breakout above 1.3635 may lead to a rise toward 1.3665 and 1.3695

Selling on a breakout below 1.3605 may lead to a fall toward 1.3560 and 1.3530

USD/JPY

Buying on a breakout above 145.20 may lead to a rise toward 145.60 and 145.90

Selling on a breakout below 144.90 may lead to a decline toward 144.65 and 144.30

Mean Reversion Strategy (Pullbacks):

EUR/USD

I will look to sell after a failed breakout above 1.1635, with a return below that level

I will look to buy after a failed breakout below 1.1606, with a return above that level

GBP/USD

I will look to sell after a failed breakout above 1.3629, with a return below that level

I will look to buy after a failed breakout below 1.3603, with a return above that level

AUD/USD

I will look to sell after a failed breakout above 0.6518, with a return below that level

I will look to buy after a failed breakout below 0.6491, with a return above that level

USD/CAD

I will look to sell after a failed breakout above 1.3739, with a return below that level

I will look to buy after a failed breakout below 1.3714, with a return above that level