The euro and pound surged sharply, and there were objective reasons for this.

Yesterday, both the euro and the pound rose sharply after central bank officials announced abrupt shifts in their countries' monetary policies. Members of the European Central Bank stated they are ready to raise interest rates at their next meeting in April this year. The primary reason for this is the effects of the war in Iran, which have already led to significant inflation increases.

This announcement surprised many market participants, who had expected a more cautious approach from the ECB. However, rising inflation, driven by geopolitical tension, forced the central bank to reconsider its plans. A similar stance was taken by the Bank of England's leadership. Yesterday, Andrew Bailey stated that instead of plans for rate cuts, the central bank would likely be forced to raise them soon if the situation in the Middle East does not improve.

Today, market participants, especially those closely monitoring events in the Eurozone, are anticipating an active end to the week. The main focus will be on the publication of macroeconomic data characterizing the region's solvency and foreign trade activity, as well as statements from key figures in the European financial system.

In the first half of the day, we expect reports from the ECB on the balance of payment account and the trade balance of the Eurozone. These indicators are among the key metrics reflecting external financial flows into the Eurozone. A positive balance will indicate that foreign currency inflows into the Eurozone exceed outflows. A negative trend in the balance may signal capital flight or an increase in external debts, which could potentially weaken the euro.

The speech of Bundesbank President Joachim Nagel also carries weight and can significantly influence trader sentiment. Market participants will be looking for hints in his speech regarding potential future rate hikes, monetary policy, assessments of the current economic situation, and inflation risks.

As for the pound, the first half of the day in the UK financial market will be characterized by relative calm. Only the report on the UK government's net borrowing requirement is expected. This indicator provides insight into the scale of the government's debt burden and its need to raise funds to finance its operations. The second important release will be the publication of the balance of industrial orders from the Confederation of British Industry. This indicator is leading, as it reflects the sentiment and expectations of the country's manufacturing sector. Although these data may not cause sharp market movements, their publication will provide a more accurate picture of the current economic situation in the UK.

If the data aligns with economists' expectations, it would be better to act based on the Mean Reversion strategy. If the data turns out to be significantly above or below economists' expectations, the Momentum strategy would be the best approach.

Momentum Strategy (for Breakout):

For the EUR/USD Pair

• Long positions on a breakout at the level of 1.1570 may lead to growth for the euro towards the areas of 1.1600 and 1.1635;
• Short positions on a breakout at the level of 1.1540 may lead to a drop in the euro towards the areas of 1.1505 and 1.1475;

For the GBP/USD Pair

• Longs on a breakout at the level of 1.3415 may lead to growth for the pound towards the areas of 1.3440 and 1.3465;
• Shorts on a breakout at the level of 1.3390 may lead to a drop in the pound towards the areas of 1.3360 and 1.3320;

For the USD/JPY Pair

• Longs on a breakout at the level of 158.57 may lead to growth for the dollar towards the areas of 158.87 and 159.18;
• Shorts on a breakout at the level of 158.28 may lead to a drop in the dollar towards the areas of 157.93 and 157.69;

Mean Reversion Strategy (for Rebound):

For the EUR/USD Pair

• Shorts will be sought after a failed breakout above 1.1581 on a return below this level;
• Longs will be sought after a failed breakout below 1.1546 on a return to this level;

For the GBP/USD Pair

• Shorts will be sought after a failed breakout above 1.3432 on a return below this level;
• Longs will be sought after a failed breakout below 1.3390 on a return to this level;

For the AUD/USD Pair

• Shorts will be sought after a failed breakout above 0.7105 on a return below this level;
• Longs will be sought after a failed breakout below 0.7074 on a return to this level;

For the USD/CAD Pair

• Shorts will be sought after a failed breakout above 1.3742 on a return below this level;
• Longs will be sought after a failed breakout below 1.3719 on a return to this level;