Demand for risk assets fell sharply, and the U.S. dollar strengthened after U.S. strikes on Iran's nuclear facilities.

The initial decline of the euro and the pound against the dollar was quickly reversed, keeping trading within last week's sideways channel. The resilience of the market can be attributed to several factors. First, market participants have likely already priced in the geopolitical risks associated with Iran. Second, the scale of the attack may have been perceived as limited and not posing a threat to regional stability as a whole. However, despite the current calm, the risks of conflict escalation remain. Any further strikes or retaliatory actions by Iran could spark a new wave of uncertainty and volatility in currency markets. Traders should exercise caution and thoroughly assess risks when making investment decisions.

Today, Eurozone activity data is expected. The influence of macroeconomic data on the performance of risk assets is likely to be mixed. On the one hand, weak manufacturing PMI figures from the eurozone could increase downward pressure on the euro. Traders may interpret the slowdown in industrial production as a sign of deeper economic issues and reduce their euro positions, leading to euro depreciation against the U.S. dollar.

However, there is a counterargument. Expectations of a rebound in the eurozone's services sector — reflected in a potential return of the corresponding index to the neutral 50-point mark — could soften the negative impact of the industrial data. If the services sector shows resilience or even slight growth, this may signal diversification within the European economy and reduced dependence on industrial output. In such a case, the euro's decline will likely be limited.

Similar reports and market reactions are expected for the UK services sector.

If the data meets economists' expectations, it is advisable to follow a Mean Reversion strategy. A Momentum strategy is more appropriate if the data significantly exceeds or falls short of expectations.

Momentum Strategy (Breakout):

EUR/USD

Buy on breakout above 1.1525, targeting 1.1545 and 1.1580.

Sell on breakout below 1.1500, targeting 1.1475 and 1.1440.

GBP/USD

Buy on breakout above 1.3440, targeting 1.3475 and 1.3510.

Sell on breakout below 1.3420, targeting 1.3400 and 1.3380.

USD/JPY

Buy on breakout above 147.25, targeting 147.60 and 148.10.

Sell on breakout below 146.90, targeting 146.75 and 146.50.

Mean Reversion Strategy (Pullbacks):

EUR/USD

Sell after a failed breakout above 1.1516 followed by a return below the level.

Buy after a failed breakout below 1.1472 followed by a return above the level.

GBP/USD

Sell after a failed breakout above 1.3440 followed by a return below the level.

Buy after a failed breakout below 1.3397 followed by a return above the level.

AUD/USD

Sell after a failed breakout above 0.6425 followed by a return below the level.

Buy after a failed breakout below 0.6381 followed by a return above the level.

USD/CAD

Sell after a failed breakout above 1.3772 followed by a return below the level.

Buy after a failed breakout below 1.3748 followed by a return above the level.