Pressure on risk assets has eased even though the situation in the Middle East continues to deteriorate. The euro, pound, and yen remain within their respective trading channels, and the market appears to be in a holding pattern, awaiting new and clearer signals.

Last Friday's release of the University of Michigan Consumer Sentiment Index, which showed growth, failed to support the dollar's continued rise against risk assets. Traders seem to have already priced in positive expectations for the U.S. economy, and further strengthening of the dollar will require more compelling arguments.

At the same time, the euro and the pound are showing resilience today, despite ongoing concerns about the escalation of the Iran-Israel military conflict. Only Italy's Consumer Price Index is scheduled for release in the first half of the day. Around midday, Bundesbank President Joachim Nagel is set to deliver a speech.

The Italian CPI will undoubtedly attract attention, although its impact on the overall dynamics of the eurozone is likely to be limited. Far more significant is the speech by Joachim Nagel, head of the Bundesbank. His comments on inflation, interest rates, and the outlook for the German and eurozone economies may significantly influence investor sentiment and the euro exchange rate.

The market will closely analyze the tone of Nagel's speech. This could support the euro if he expresses concern about persistently high inflation and signals that the European Central Bank is ready to pause its rate-cutting cycle. On the other hand, if he focuses on risks to economic growth and hints at further policy easing, it could pressure the European currency.

A mean reversion strategy is better if the data aligns with economists' expectations. A Momentum strategy is more suitable if the data significantly exceeds or falls short of expectations.

Momentum Strategy (Breakout):

EUR/USD

Buying on a breakout above 1.1566 may lead to a rise toward 1.1597 and 1.1628;

Selling on a breakout below 1.1545 may lead to a decline toward 1.1525 and 1.1505.

GBP/USD

Buying on a breakout above 1.3575 may lead to a rise toward 1.3599 and 1.3629;

Selling on a breakout below 1.3555 may lead to a decline toward 1.3535 and 1.3503.

USD/JPY

Buying on a breakout above 144.32 may lead to a rise toward 144.68 and 145.05;

Selling on a breakout below 144.00 may lead to a decline toward 143.66 and 143.25.

Mean Reversion Strategy (Pullbacks):

EUR/USD

I will look for selling opportunities after a failed breakout above 1.1561 and a return below this level;

I will look for buying opportunities after a failed breakout below 1.1520 and a return to this level.

GBP/USD

I will look for selling opportunities after a failed breakout above 1.3577 and a return below this level;

I will look for buying opportunities after a failed breakout below 1.3530 and a return to this level.

AUD/USD

I will look for selling opportunities after a failed breakout above 0.6507 and a return below this level;

I will look for buying opportunities after a failed breakout below 0.6464 and a return to this level.

USD/CAD

I will look for selling opportunities after a failed breakout above 1.3615 and a return below this level;

I will look for buying opportunities after a failed breakout below 1.3577 and a return to this level.