The dollar has collapsed amid new challenges facing the American economy. Pressure on the dollar increased toward the end of last week after the risk of a U.S. government shutdown on January 31 rose. A funding dispute over the U.S. Department of Homeland Security escalated in Congress. Investors expressed concern about political instability, leading to a sharp decline in the dollar against major world currencies. The euro, pound, and yen strengthened, reflecting a flight from riskier assets. The consequences of the shutdown for the U.S. economy, including a slowdown in economic growth and a deteriorating business climate, may negatively impact the dollar's future prospects. Additionally, Donald Trump threatened Canada with 100% tariffs due to its attempts to negotiate a trade agreement with China.

As for today, in the first half of the day, we expect figures for the business climate indicator from IFO in Germany, the current situation assessment indicator, and the economic expectations indicator for Germany. Additionally, there will be a speech from the President of the Bundesbank, Joachim Nagel. These data traditionally have a significant impact on the euro, as Germany is the largest economy in the Eurozone. An improvement in the IFO figures could strengthen the euro, signaling optimism in the business environment and potential economic growth. Conversely, a decline in the figures could put pressure on the currency, indicating concerns about an economic slowdown.

The President of the Bundesbank's speech may also influence currency markets. Traders will closely monitor his comments on inflation, monetary policy, and economic growth prospects.

Unfortunately, there is no economic data scheduled for release today for the UK, nor are there any planned speeches from politicians, so if there is even a minor correction in the pound after a significant rise in the Asian session, the bulls may take the initiative again to continue the upward trend.

If the data aligns with economists' expectations, it is better to act on a Mean Reversion strategy. If the data comes in significantly higher or lower than economists' expectations, it is best to use a Momentum strategy.

Momentum Strategy (Breakout):

For the EUR/USD Pair

Long positions on the breakout of the level 1.1885 may lead to an increase in the euro to the area of 1.1910 and 1.1935;

Short positions on the breakout of the level 1.1847 may lead to a decrease in the euro to the area of 1.1815 and 1.1785;

For the GBP/USD Pair

Longs on the breakout of the level 1.3685 may lead to an increase in the pound to the area of 1.3720 and 1.3773;

Shorts on the breakout of the level 1.3655 may lead to a decrease in the pound to the area of 1.3622 and 1.3593;

For the USD/JPY Pair

Longs on the breakout of the level 158.80 may lead to an increase in the dollar to the area of 159.15 and 159.45;

Shorts on the breakout of the level 158.60 may lead to a sell-off of the dollar to the area of 158.30 and 157.90;

Mean Reversion Strategy (Pullback):

For the EUR/USD Pair

I will look for shorts after a failed breakout above 1.1880 on a return below this level;

I will look for longs after a failed breakout below 1.1845 on a return to this level;

For the GBP/USD Pair

I will look for shorts after a failed breakout above 1.3684 on a return below this level;

I will look for longs after a failed breakout below 1.3638 on a return to this level;

For the AUD/USD Pair

I will look for shorts after a failed breakout above 0.6933 on a return below this level;

I will look for longs after a failed breakout below 0.6906 on a return to this level;

For the USD/CAD Pair

I will look for shorts after a failed breakout above 1.3695 on a return below this level;

I will look for longs after a failed breakout below 1.3663 on a return to this level.