The Euro and the Pound Plunged Against the Dollar Amid Growing Concerns Among European Officials About the Future of Their Countries Following the EU-US Trade Deal

The key factor that triggered the drop in the euro was disappointment with the terms of the trade agreement with the United States. Initial hopes for a significant boost in trade turnover and economic growth were replaced by the realization that the agreement contains a number of provisions that could harm European industry and agriculture. In particular, there are concerns about a potential decline in the competitiveness of European goods in the U.S. market and the possible influx of cheaper American products into Europe.

Today, only data on Spain's GDP volume change is expected, so a strong recovery of the euro in the first half of the day is unlikely. However, even minor positive surprises from Spain could provide local support for the euro, especially if they contrast with the overall negative market sentiment. Traders will closely monitor the details of Spanish data to assess the resilience of the economic recovery and its potential impact on the entire eurozone. In the medium term, the key factor for the euro will remain the monetary policy of the European Central Bank. Markets expect further steps toward monetary easing, but the pace and scale of these changes remain uncertain.

As for the pound, the focus will shift to UK mortgage lending figures, which may signal a slowdown in the real estate market, putting further pressure on the pair. The dynamics of the M4 money supply, in turn, are an important indicator of inflationary pressure. A decline in M4 in the UK may indicate slowing inflation, allowing the Bank of England to act more aggressively in lowering interest rates—another reason to sell the pound.

If the data aligns with economists' expectations, it is better to operate based on a Mean Reversion strategy. If the data turns out significantly higher or lower than expected, the Momentum strategy is more appropriate.

Momentum Strategy (Breakout):

EUR/USD

Buy on a breakout above 1.1600 could lead to growth toward 1.1620 and 1.1640;

Sell on a breakout below 1.1570 could lead to a decline toward 1.1550 and 1.1510.

GBP/USD

Buy on a breakout above 1.3360 could lead to growth toward 1.3386 and 1.3415;

Sell on a breakout below 1.3335 could lead to a decline toward 1.3293 and 1.3253.

USD/JPY

Buy on a breakout above 148.50 could lead to growth toward 148.76 and 149.05;

Sell on a breakout below 148.20 could lead to a decline toward 147.90 and 147.30.

Mean Reversion Strategy (Pullbacks):

EUR/USD

Look to sell after a failed breakout above 1.1609 followed by a return below this level;

Look to buy after a failed breakout below 1.1571 followed by a return above this level.

GBP/USD

Look to sell after a failed breakout above 1.3365 followed by a return below this level;

Look to buy after a failed breakout below 1.3332 followed by a return above this level.

AUD/USD

Look to sell after a failed breakout above 0.6537 followed by a return below this level;

Look to buy after a failed breakout below 0.6510 followed by a return above this level.

USD/CAD

Look to sell after a failed breakout above 1.3746 followed by a return below this level;

Look to buy after a failed breakout below 1.3726 followed by a return above this level.