EUR and GBP opened with a downward gap, but these dips were soon covered. The likelihood that the United States' key trading partners would reach a swift agreement on removing the punitive tariffs has diminished, which led to a sharp drop in demand for risk assets. It is more likely that, following China's example, retaliatory tariffs will be imposed against the U.S., potentially escalating global trade wars even further.
The strong March U.S. Nonfarm Payrolls report was not received as enthusiastically by traders, as it was accompanied by an increase in the unemployment rate to 4.2%. Looking deeper, the picture is more nuanced. While rising unemployment is typically negative, it may also result from an expanding labor force, which signals growing confidence among individuals in finding employment. In other words, people who were previously not part of the labor force are now actively seeking jobs. This contributed to a more muted impact on the currency market.
This week, attention will shift to speeches by Federal Reserve officials and upcoming macroeconomic data, which should help clarify the U.S. economic outlook and interest rate expectations.
This morning, market participants await data on Germany's industrial production and Italy's trade balance. These reports traditionally draw interest from analysts and investors, as they are key indicators of the health of the European economy. German industrial production reflects the overall dynamics of the manufacturing sector, and its recent decline indicates weakening demand, usually weighing on the euro. Italy's trade balance—export minus import—helps assess the country's trade surplus or deficit. A positive balance suggests stronger exports and supports the national currency, whereas a negative balance can point to economic issues and currency depreciation.
The Eurozone Sentix Investor Confidence Index and retail sales figures are also due today. Only very strong data from the Euro area would enable euro buyers to regain momentum.
Applying a mean reversion strategy is best if the figures align with economists' expectations. A Momentum strategy is preferable if the data significantly exceeds or falls short of expectations.
Buying on a breakout above 1.1020 may lead to a rise toward 1.1085 and 1.1145.
Selling on a breakout below 1.0960 may lead to a decline toward 1.0890 and 1.0845.
Buying on a breakout above 1.2940 may lead to a rise toward 1.3000 and 1.3050.
Selling on a breakout below 1.2890 may lead to a decline toward 1.2831 and 1.2766.
Buying on a breakout above 145.93 may lead to a rise toward 146.22 and 146.49.
Selling on a breakout below 145.60 may lead to a decline toward 145.28 and 144.95.
I will look for short entries after a failed breakout above 1.1023 followed by a return below this level.
I will look for long entries after a failed breakout below 1.0902 followed by a return above this level.
I will look for short entries after a failed breakout above 1.2939 followed by a return below this level.
I will look for long entries after a failed breakout below 1.2837 followed by a return above this level.
I will look for short entries after a failed breakout above 0.6087 followed by a return below this level.
I will look for long entries after a failed breakout below 0.5967 followed by a return above this level.
I will look for short entries after a failed breakout above 1.4269 followed by a return below this level.
I will look for long entries after a failed breakout below 1.4192 followed by a return above this level.
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