Yesterday, the U.S. dollar continued to strengthen against the euro, the pound, and other risk assets, extending the trend that began on Wednesday.

Strong U.S. labor market data and the rise in the core Personal Consumption Expenditures (PCE) index confirmed the resilience of the American economy, which reduced expectations of an imminent shift toward monetary easing by the Federal Reserve. The increase in the PCE index—a key inflation indicator monitored by the Fed—heightened concerns about persistent inflationary pressures. This, in turn, reinforced the view that the Fed may keep interest rates at elevated levels for longer than previously anticipated.

Today, markets are awaiting figures on the manufacturing PMI for Eurozone countries, as well as the Eurozone Consumer Price Index (CPI) and Core CPI. These indicators will serve as important gauges of the state of the European economy and will help determine the future direction of the European Central Bank's monetary policy.

The Manufacturing PMI acts as a barometer of industrial health. A reading above 50 indicates expansion, while one below 50 signals contraction. Today's revised release, if improved, could help support euro strength.

Equally important are the CPI data. The headline CPI reflects changes in prices across a broad range of goods and services, while the Core CPI excludes volatile components such as food and energy, providing a clearer view of underlying inflation pressures. A decline in CPI could force the ECB to consider rate cuts again, weakening the euro on the market.

If the data match economists' expectations, it is best to rely on a Mean Reversion strategy. If the figures deviate significantly from expectations—either much higher or lower—a Momentum strategy is more appropriate.

Momentum Strategy (Breakout):

EUR/USD

Buying on a breakout above 1.1440 could lead to a rise toward 1.1475 and 1.1501.

Selling on a breakout below 1.1405 could lead to a decline toward 1.1377 and 1.1347.

GBP/USD

Buying on a breakout above 1.3215 could lead to a rise toward 1.3250 and 1.3270.

Selling on a breakout below 1.3180 could lead to a decline toward 1.3130 and 1.3100.

USD/JPY

Buying on a breakout above 150.60 could lead to a rise toward 150.99 and 151.32.

Selling on a breakout below 150.35 could trigger a decline toward 150.10 and 149.85.

Mean Reversion Strategy (Pullbacks):

EUR/USD

I will look for selling opportunities after a failed breakout above 1.1436 followed by a return below this level.

I will look for buying opportunities after a failed breakout below 1.1402 followed by a return above this level.

GBP/USD

I will look for selling opportunities after a failed breakout above 1.3220 followed by a return below this level.

I will look for buying opportunities after a failed breakout below 1.3183 followed by a return above this level.

AUD/USD

I will look for selling opportunities after a failed breakout above 0.6448 followed by a return below this level.

I will look for buying opportunities after a failed breakout below 0.6426 followed by a return above this level.

USD/CAD

I will look for selling opportunities after a failed breakout above 1.3866 followed by a return below this level.

I will look for buying opportunities after a failed breakout below 1.3841 followed by a return above this level.