The dollar was again subject to another sharp sell-off, for objective reasons.

Talks that Europe may start selling US stocks and bonds in response to Trump's renewed trade war led to a sharp decline in the dollar and a strengthening of risk assets, including the euro and the British pound. Traders, frightened by the prospect of escalation, began to dispose of dollar assets and to seek safer havens in European currencies. Many experts forecast further volatility, stressing that the outcome of this potential new trade war is unpredictable.

European politicians have already indicated they are considering tariffs on US goods worth €93 billion in response to the threat of new duties. Some experts believe Europe will be forced to take a tough stance to protect its economic interests.

As for data, this morning Germany's producer price index, the German ZEW economic sentiment index, and the euro-area ZEW sentiment index are expected. These indicators will be important gauges of the European economy's health and will allow an assessment of its resilience amid global challenges.

The German producer price index, in particular, will provide insight into inflationary trends and pressures on businesses. A higher-than-expected print could signal rising inflation. The German ZEW economic sentiment index is a leading indicator of economic activity: positive sentiment can signal forthcoming growth, while negative sentiment points to a risk of slowing. Similarly, the euro-area ZEW sentiment index will help assess the overall business climate in the region. Together, today's releases could have a meaningful impact on the euro's dynamics.

Regarding the pound, attention will focus on UK reports on changes in initial jobless claims and the unemployment rate. A fall in unemployment will indicate a strong labour market and could push the pound higher. At the same time, average earnings data will also be released, an important factor for assessing inflationary pressure. Wage growth outpacing productivity growth could lead to higher prices and inflationary pressure, adding impetus to the Bank of England.

If the data match economists' expectations, it is better to act using a Mean Reversion strategy. If the data are much higher or lower than economists' expectations, it is best to use a Momentum strategy.

Momentum strategy (on breakout):

For EURUSD

• Buying on a breakout of 1.1676 may push the euro toward 1.1697 and 1.1717;
• Selling on a breakout of 1.1655 may send the euro down to 1.1640 and 1.1614;

For GBPUSD

• Buying on a breakout of 1.3453 may push the pound toward 1.3475 and 1.3499;
• Selling on a breakout of 1.3436 may send the pound down to 1.3410 and 1.3382;

For USDJPY

• Buying on a breakout of 158.28 may drive the dollar toward 158.53 and 158.81;
• Selling on a breakout of 157.93 may trigger dollar sell?offs toward 157.69 and 157.40;

Mean Reversion strategy (on return):

For EURUSD

• I will look for short positions after a failed move above 1.1682 on the return back below that level;
• I will look for long positions after a failed move above 1.1642 on the return to that level;

For GBPUSD

• I will look for shorts after a failed move above 1.3458 on the return back below that level;
• I will look for longs after a failed move above 1.3419 on the return to that level;

For AUDUSD

• I will look for shorts after a failed move above 0.6754 on the return back below that level;
• I will look for longs after a failed move above 0.6713 on the return to that level;

For USDCAD

• I will look for shorts after a failed move above 1.3870 on the return back below that level;
• I will look for longs after a failed move above 1.3832 on the return to that level.