Intraday Strategies for Beginner Traders on February 18

[Ben Graham]

The U.S. dollar continued to strengthen against risk assets, including the euro and the British pound, which was most affected by weak UK data.

Data showed that the U.S. Empire Manufacturing Index, a key indicator of business activity in New York State, demonstrated impressive resilience yesterday, exceeding economists' expectations. This came as an unexpected but pleasant surprise to financial markets, leading to an immediate reaction: a strengthened U.S. dollar. However, comments from Federal Reserve representatives somewhat cooled the buyers' enthusiasm, returning balance to the market.

Today's economic agenda in the first half of the day promises to be relatively calm, with a primary focus on the release of one key indicator—the Consumer Price Index (CPI) for France. This indicator is one of the primary measures of inflation in the country and plays a significant role in shaping the overall picture of inflationary processes in the Eurozone. CPI data for France is typically closely monitored by analysts and traders, as its significance may impact the rates of the European currency. It is expected that the figures for this period will not differ much from economists' forecasts.

As for the British pound, today also promises to be eventful. Trader attention will focus primarily on the UK Consumer Price Index. This key inflation indicator is crucial for the Bank of England's future decisions regarding monetary policy. High inflation figures may force the central bank to maintain a tighter stance, while weaker data could pave the way for a swift change in paradigm and a cut in interest rates, which in turn would negatively affect the pound. Concurrently with the CPI, data on retail sales and the producer price index will be published.

The combination of these releases, along with yesterday's UK labor market data, is likely to drive strong volatility in the currency market.

If the data meet economists' expectations, it is better to act based on the Mean Reversion strategy. If the data turns out to be significantly higher or lower than economists' expectations, the Momentum strategy would be more appropriate.

Momentum Strategy (Breakout):

For the EUR/USD Pair:

• Buying on a breakout above 1.1855 could lead to an increase in the euro towards 1.1889 and 1.1925;
• Selling on a breakout below 1.1835 could lead to a decline in the euro towards 1.1804 and 1.1770;

For the GBP/USD Pair:

• Buying on a breakout above 1.3565 could lead to an increase in the pound towards 1.3585 and 1.3605;
• Selling on a breakout below 1.3545 could lead to a decline in the pound towards 1.3520 and 1.3500;

For the USD/JPY Pair:

• Buying on a breakout above 153.70 could lead to an increase in the dollar towards 154.15 and 154.35;
• Selling on a breakout below 153.25 could lead to a sell-off in the dollar towards 152.85 and 152.45;

Mean Reversion Strategy (Return):

For the EUR/USD Pair:

• I will look for short positions after a failed breakout above 1.1858 on a return below this level;
• I will look for long positions after a failed breakout below 1.1836 on a return to this level;

For the GBP/USD Pair:

• I will look for shorts after a failed breakout above 1.3573 on a return below this level;
• I will look for longs after a failed breakout below 1.3544 on a return to this level;

For the AUD/USD Pair:

• I will look for shorts after a failed breakout above 0.7085 on a return below this level;
• I will look for longs after a failed breakout below 0.7061 on a return to this level;

For the USD/CAD Pair:

• I will look for shorts after a failed breakout above 1.3658 on a return below this level;
• I will look for longs after a failed breakout below 1.3636 on a return to this level;

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