FX.co ★ Intraday Strategies for Beginner Traders for the Euro on October 26

The euro week began with a gap up. Friday's close was around 1.1195, and the market opened near 1.1213; the pair then reached 1.1227 and now stands around 1.1217. The main reason was calmer weekend developments than feared. The market prepared for the worst and got a moderate scenario.

Let's start with France. Saturday's protests gathered about 410,000 people according to the interior ministry, while organizers claimed around 800,000. By evening, nearly a thousand people had been detained, and there were reports of looting, but large-scale destruction like on October 17 was avoided. Additional relief came from the Middle East, where Donald Trump did not launch an active war with Iran despite many media fears over the weekend. For FX markets, the chain is simple. When worrying news subsides, demand for the dollar as a safe-haven currency falls, and the euro gets a chance to recover losses. But remember the euro posted a disappointing composite PMI of 51.9 versus 53.1 on Friday, so the current recovery rests more on reduced political risk than strong economic news.

U.S. data gave only limited support to the dollar. The U.S. composite PMI was 57.6, and the manufacturing index rose to 56.0 — the best reading since May 2022 and above the 55.5 forecast. But the probability of a Federal Reserve rate hike at the next meeting is below 10%, and the rise in selling prices in the survey only confirms the previous picture. I believe that while France remains calm and Washington refrains from escalation, EUR/USD can hold the gap.

This morning the market will receive one of the week's most interesting European releases: Germany's Ifo survey for October. The poll surveys roughly 9,000 German firms about current conditions and expectations for the next six months. Germany is the euro area's largest economy, so Ifo is considered a quick indicator of its health. The main indicator, the business-climate index, is expected to rise to 90.0 from 89.9 in September; in August it was 88.8, so analysts foresee a continued slow improvement. The current-situation reading is forecast at 89.4 after 89.5, and expectations at 89.9 after 90.4 — mixed within the report, but the overall climate is penciled slightly higher. For context, on Friday Germany's composite PMI was 52.8 versus 53.8 a month earlier, services fell to 51.7 from 52.9, while manufacturing beat expectations at 54.2. The ZEW on October 20 showed expectations worsening to 28.1 from 34.7, while the current-situation assessment improved to -35.9 from -47.1. The Bundesbank warned on Wednesday that the economy likely stagnated in Q3 with inflation at 3.3%.

If Ifo prints better than expected, the euro could continue the morning gap-driven rally, especially given the calmer weekend. I believe even a small improvement in the business climate will help EUR/USD stay above Friday's close, while disappointment will quickly return the pair to pressure.

Momentum

For the euro, the main reference points are 1.1231 above and 1.1207 below. At 1.1217, price sits 14 pips below the top level and 10 pips above the bottom, so it is almost in the middle of the narrow range. After the open, the pair briefly fell to 1.1203 below the lower level but quickly returned, so I do not count that first touch as a confirmed breakout. I consider long positions only if price convincingly holds above 1.1231; targets are 1.1259 and 1.1298. This scenario seems slightly more likely to me while the weekend remains calm and Ifo does not disappoint. Short positions below 1.1207 with targets of 1.1186 and 1.1155 will become possible if German data are weak or worrying news reappears.

Mean Reversion

For the euro, the mean-reversion levels are 1.1229 and 1.1205. Both lie very close to the breakout thresholds. The upper level, 1.1229, is two pips below the breakout-buy at 1.1231; the lower level, 1.1205, is two pips below the breakout-sell at 1.1207. Two pips is market noise, and beginners must be especially careful because, on the first touch, you cannot tell a rebound from a breakout. My view of the upper scenario: price rises to 1.1229 and then quickly falls back—that would be a sell signal, since the morning high of 1.1227 reversed roughly from there. If the price holds above 1.1231, selling is not allowed — that is a confirmed breakout. The lower scenario: price moves below 1.1207, reaches 1.1205, fails to hold, and returns above 1.1207—then longs are appropriate with a stop under the false-break low. If price holds below 1.1205, mean reversion fails and attention shifts to the 1.1186 target.