The U.S. dollar quickly lost ground against risk assets at the end of last week, with clear reasons for this shift.

Data showed that the U.S. core Personal Consumption Expenditures (PCE) index matched economists' forecasts, indicating moderate price pressures in the U.S. This sharply weakened the dollar's position. Traders interpreted it as a signal that the Federal Reserve can continue cutting interest rates without major risks, stimulating the economy and supporting the labor market. As a result, U.S. assets became less attractive, triggering capital outflows.

The euro, the British pound, and other risk-sensitive assets, by contrast, strengthened on expectations that their central bank would maintain a wait-and-see approach regarding interest rates.

Today, the first half of the session brings a scheduled speech by Bundesbank President Joachim Nagel. His remarks on future monetary policy could strengthen the euro against the dollar. Markets closely monitor every word from leading central bankers, and Nagel's speech is no exception. In the current situation, where the outlook for further European Central Bank actions remains uncertain, any hints of the end of the rate-cutting cycle could trigger a wave of euro buying.

In the U.K., data on mortgage approvals, net lending to individuals, and changes in the M4 money supply will be published. These indicators, traditionally viewed as signals of the U.K. economy's health, could significantly influence trader sentiment and, in turn, the pound's exchange rate.

• Mortgage approvals reflect housing market dynamics. Growth in approvals typically signals positive sentiment and the willingness of households to take on long-term credit.
• Net lending to individuals shows household credit activity.
• M4 money supply growth indicates overall liquidity conditions. A rising M4 may indicate increased inflationary pressures, which would be supportive for the pound.

If the data aligns with expectations, the best approach is to rely on a Mean Reversion strategy. If the data significantly deviates from forecasts, a Momentum strategy is preferable.

Momentum Strategy (Breakout):

EUR/USD

Buying on a breakout above 1.1740 may lead to growth toward 1.1760 and 1.1786.

Selling on a breakout below 1.1715 may lead to a decline toward 1.1670 and 1.1640.

GBP/USD

Buying on a breakout above 1.3450 may lead to growth toward 1.3470 and 1.3499.

Selling on a breakout below 1.3430 may lead to a decline toward 1.3405 and 1.3370.

USD/JPY

Buying on a breakout above 149.01 may lead to growth toward 149.32 and 149.64.

Selling on a breakout below 148.80 may lead to a decline toward 148.60 and 148.30.

Mean Reversion Strategy (Pullbacks):

EUR/USD

Selling will be considered after a failed breakout above 1.1740 with a return below this level.

Buying will be considered after a failed breakout below 1.1713 with a return above this level.

GBP/USD

Selling will be considered after a failed breakout above 1.3448 with a return below this level.

Buying will be considered after a failed breakout below 1.3409 with a return above this level.

AUD/USD

Selling will be considered after a failed breakout above 0.6582 with a return below this level.

Buying will be considered after a failed breakout below 0.6545 with a return above this level.

USD/CAD

Selling will be considered after a failed breakout above 1.3938 with a return below this level.

Buying will be considered after a failed breakout below 1.3911 with a return above this level.