Euro, Pound, and Yen Plunged — and There Were Very Good Reasons for It

The overnight Israeli strike on Iran's nuclear facilities triggered a collapse in risk assets, restoring demand for the U.S. dollar as a safe-haven asset. Traders, caught in a sudden wave of geopolitical uncertainty, rushed to offload such assets, reallocating capital into more reliable instruments traditionally considered a safe harbor during turbulent times.

The first reports of strikes on Iranian nuclear sites sparked panic in Asian markets, which quickly spread to Europe and America. Gold, another traditional safe-haven asset, also saw a sharp price spike, although less pronounced than the dollar's rally.

Naturally, all attention today will focus on further developments in the Middle East.

As for economic data, the first half of the day is expected to bring figures on Germany's Consumer Price Index, changes in Eurozone industrial production, and the Eurozone trade balance. As a barometer of the region's economic health, these indicators will be monitored by investors and traders globally, but under the current circumstances, they are unlikely to carry much weight.

Germany's CPI will be a key indicator of inflationary pressure. The change in Eurozone industrial production will offer insights into the state of the manufacturing sector, which is a vital driver of economic growth. The Eurozone trade balance will reflect the difference between exports and imports. Together, these figures will shape a picture of the Eurozone's economic situation and could influence currency markets — but not today.

If the data aligns with economists' expectations, acting based on the Mean Reversion strategy would be better. If the data turns out significantly above or below forecasts, then the Momentum strategy would be the most effective approach.

Momentum Strategy (Breakout):

EUR/USD

Buying on a breakout above 1.1556 could lead to gains toward 1.1591 and 1.1628.

Selling on a breakout below 1.1507 could trigger a drop toward 1.1456 and 1.1408.

GBP/USD

Buying on a breakout above 1.3567 could lead to a rise toward 1.3595 and 1.3629.

Selling on a breakout below 1.3531 could push the pair down toward 1.3503 and 1.3465.

USD/JPY

Buying on a breakout above 143.66 could send the dollar toward 144.08 and 144.53.

Selling on a breakout below 143.25 could result in a decline toward 142.79 and 142.32.

Mean Reversion Strategy (Pullbacks):

EUR/USD

Look for short entries after a failed breakout above 1.1564 and a return below this level.

Look for long entries after a failed breakout below 1.1501 and a return to this level.

GBP/USD

Look for short entries after a failed breakout above 1.3585 and a return below this level.

Look for long entries after a failed breakout below 1.3511 and a return to this level.

AUD/USD

Look for short entries after a failed breakout above 0.6505 and a return below this level.

Look for long entries after a failed breakout below 0.6459 and a return to this level.

USD/CAD

Look for short entries after a failed breakout above 1.3656 and a return below this level.

Look for long entries after a failed breakout below 1.3622 and a return to this level.