FX.co ★ Intraday Strategies for Beginner Traders – October 6

The U.S. dollar remains under pressure. The main reasons for its weakness include disappointing economic data and the ongoing government shutdown in the U.S. since mid-last week.

The decline of the ISM Services PMI to the critical 50-point level caused concern among market participants. However, the market appeared to anticipate such a slowdown, further reinforcing expectations of upcoming monetary policy easing from the Federal Reserve. With the ISM index hovering near contraction territory, the trend of weakening economic growth is becoming clearer. That said, the market's reaction to the data was restrained, as investors are awaiting more precise signals from the Fed. The upcoming FOMC meeting will be crucial in determining the dollar's future trajectory.

Today's major focus will be on the following: Eurozone Sentix Investor Confidence Index, Eurozone Retail Sales, and a speech by European Central Bank President Christine Lagarde.

These may significantly influence the euro and overall market sentiment: The Sentix Index reflects investor views on the Eurozone's economic outlook. Values above zero indicate optimism, while values below zero indicate pessimism. Retail sales data indicate the strength of consumer demand, a key driver of GDP growth. Weak retail figures may signal slowing economic momentum. Christine Lagarde's comments will likely impact expectations surrounding ECB policy. Recent statements have indicated no change in current monetary policy direction — and that's likely to hold today.

Regarding the British pound, UK Construction PMI, and a speech from Bank of England Governor Andrew Bailey are expected. A weakening PMI figure would point to ongoing industry struggles, including material shortages, price hikes, and decreased demand. Cautious rhetoric from Bailey may suggest reduced confidence in economic performance and lower expectations for holding interest rates steady — potentially weakening the pound.

If the reported data closely aligns with economists' expectations, use a Mean Reversion strategy. If the reports sharply exceed or fall short of forecasts, use a Momentum strategy.

Momentum Strategy (Breakout):

For the EUR/USD pair

Buying on a breakout above 1.1743 may lead to euro growth toward the 1.1777 and 1.1817 zones

Selling on a breakout below 1.1710 may lead to the euro declining toward the 1.1685 and 1.1650 zones

For the GBP/USD pair

Buying on a breakout above 1.3457 may lead to pound growth toward the 1.3506 and 1.3556 zones

Selling on a breakout below 1.3420 may lead to a decline of the pound toward the 1.3400 and 1.3365 zones

For the USD/JPY pair

Buying on a breakout above 150.50 may lead to dollar growth toward the 150.76 and 151.10 zones

Selling on a breakout below 150.15 may lead to a dollar decline toward the 149.90 and 149.62 zones

Mean Reversion Strategy (Pullback):

For the EUR/USD pair

I will look for sells after a failed breakout above 1.1739 with a return below that level

I will look for buys after a failed breakout below 1.1708 with a return above that level

For the GBP/USD pair

I will look for sells after a failed breakout above 1.3466 with a return below that level

I will look for buys after a failed breakout below 1.3429 with a return above that level

For the AUD/USD pair

I will look for sells after a failed breakout above 0.6620 with a return below that level

I will look for buys after a failed breakout below 0.6594 with a return above that level

For the USD/CAD pair

I will look for sells after a failed breakout above 1.3965 with a return below that level

I will look for buys after a failed breakout below 1.3940 with a return above that level