Demand for Risk Assets Declined After the Release of U.S. Data— But It Remains a Correction, Not a Dollar Comeback

According to the data, the U.S. Core Personal Consumption Expenditures (PCE) Index for May exceeded economists' expectations, rising by 0.2%. At the same time, the report on personal income and spending indicated a slowdown in inflation, which could potentially influence the Federal Reserve's future policy. Despite the minor outperformance of the PCE index, the overall trend points to a gradual decline in inflationary pressures. This could give the Fed more room to maneuver when making decisions about monetary policy.

Many market participants believe the Fed may opt for a rate cut — if not at the next meeting, then possibly as early as the beginning of autumn this year. The dollar's reaction to the published data was muted as market participants continued to assess a wide range of economic indicators to form a clearer picture of the U.S. economic outlook.

In the upcoming trading day, the economic calendar promises to be eventful, drawing the attention of traders to the European region. In the spotlight will be data reflecting the state of the consumer sector and inflation trends in the euro area's largest economies.

The expected figures on German retail sales will serve as a key indicator of consumer activity, revealing the dynamics of spending and the country's overall economic health.

Simultaneously, the publication of Consumer Price Index (CPI) data from Germany and France will provide valuable insights into the current inflation level. Economists will monitor these indicators closely to assess how effectively the European Central Bank (ECB) is managing to maintain price stability — especially amid significant interest rate cuts this year.

In addition, data on private-sector lending in the eurozone will be released. This figure represents the level of borrowing by businesses and households, serving as an important indicator of economic growth.

In the UK, weak figures are expected for Q1 GDP changes and the current account balance. These may pressure the pound in the first half of the day.

If the data aligns with economists' expectations, it is advisable to rely on the Mean Reversion strategy. If the data turns out to be significantly above or below forecasts, the Momentum strategy would be more effective.

Momentum Strategy (Breakout):

EUR/USD

Buying on a breakout above 1.1740 may lead to a rise in the euro toward the 1.1775 and 1.1810 areas.

Selling on a breakout below 1.1725 may lead to a decline in the euro toward the 1.1686 and 1.1643 areas.

GBP/USD

Buying on a breakout above 1.3745 may lead to a rise in the pound toward the 1.3785 and 1.3818 areas.

Selling on a breakout below 1.3715 may lead to a decline in the pound toward the 1.3675 and 1.3630 areas.

USD/JPY

Buying on a breakout above 144.40 may lead to a rise in the dollar toward the 144.90 and 145.30 areas.

Selling on a breakout below 143.80 may lead to a decline in the dollar toward the 143.40 and 143.10 areas.

Mean Reversion Strategy (Pullbacks):

EUR/USD

I will look for selling opportunities after a failed breakout above 1.1742 followed by a return below this level.

I will look for buying opportunities after a failed breakout below 1.1704 followed by a return above this level.

GBP/USD

I will look for selling opportunities after a failed breakout above 1.3743 followed by a return below this level.

I will look for buying opportunities after a failed breakout below 1.3700 followed by a return above this level.

AUD/USD

I will look for selling opportunities after a failed breakout above 0.6566 followed by a return below this level.

I will look for buying opportunities after a failed breakout below 0.6529 followed by a return above this level.

USD/CAD

I will look for selling opportunities after a failed breakout above 1.3707 followed by a return below this level.

I will look for buying opportunities after a failed breakout below 1.3648 followed by a return above this level.