The week opened with a rough morning for the euro. The dollar started Monday in good shape after Friday, while the single currency faced double pressure from strong US data and news out of France. The pound held up a bit better and fell less. The reason is simple: the euro has its own problems, while the pound's weakness mainly reflects the dollar's external strength.

Europe first. The euro is pressured by the weekend, and Asian-session events—protests in France triggered large sell-offs in the single currency. Beginners should know the market dislikes political uncertainty in large economies. While the outcome is unclear, investors tend to leave the currency and return later. Nagel of the Bundesbank said on Friday the European Central Bank could act again if conditions don't improve, but the market still expects a pause, so that comment did not save the euro. Political risk outweighed everything.

In the UK it is quiet this morning — no fresh data — and the pound benefits from stronger mid-week domestic prints. UK GDP for August rose 0.1% month-on-month (versus a small expected drop), and industrial production gained 0.8% (versus an expected fall). That matters because a resilient economy gives the Bank of England no reason to rush into cuts; policy remains at 3.75%. Recall three MPC members (Pill, Greene and Mann) previously voted for prompt tightening, and their stance supports the pound. Bailey's social-media remarks on Wednesday did not affect rates, so the pound gained no boost from that. In my view, the pound has fewer reasons for concern than the euro, which has its own political shock.

Now to the US, where two strong prints arrived on Friday. First, industrial production rose 0.7% in September versus 0.4% expected, and capacity utilization climbed to 76.9%, above forecasts. The point is simple: when factories run hot, expanding output without higher prices is difficult, so inflation remains a problem and the Federal Reserve has reason to stay tight. Second, foreign inflows into US securities were very large — $279.2bn in August versus $75.2bn expected. When foreigners buy US assets, they need dollars, boosting demand for the dollar. Warsh gave no clear signal on Friday; he said meetings are not predetermined. So the data supported the dollar without interference.

What to expect in the first half of the day? Nothing headline-grabbing. No morning releases for the euro or the pound, which should be calming. Normally, inflation, business, and industrial prints move the pair; without them, traders have little reason to change positions, and volatility falls. After a sharp decline, some traders close profitable short positions, pushing price up—so a bounce is quite possible if the dollar gets no new impulse. In my view, the pound has better odds of regaining losses than the euro. The euro will likely recoup only part of its losses and close the gap only if the external backdrop supports it. Because the morning is quiet, I would not treat small moves around key levels as trading signals.

Momentum

For the euro, the key upside reference is 1.1234. Price is currently at 1.1229, only a few pips below, so a first touch can easily be mistaken for a breakout — I would avoid treating it as one. I consider long positions only after a decisive close above 1.1234; then targets are 1.1268 and 1.1310. I am only moderately confident in that scenario because it requires fresh impulse and the morning calendar is empty, so market direction will largely depend on dollar sentiment. On the downside, the level is 1.1193 — a confident break below that would be a downside breakout with targets 1.1156 and 1.1117. Such a sell-off needs a new catalyst, for example, fresh bad news from France. For now, my main scenario is a quiet range with a mild bias toward a rebound.

For the pound, you can open long positions above 1.3337, targeting 1.3368 and 1.3397. Price sits at 1.3324, 13 pips below that level, and while it trades in a narrow range, I treat 1.3337 as a watch level rather than an immediate entry. Short positions I would consider below 1.3307, with targets 1.3273 and 1.3233. A downside breakout is possible if the dollar suddenly finds support, but I view that as less likely given the calm morning and pound's relative strength versus the euro. Sterling could first test 1.3337 and only then reveal whether it has the momentum to break higher.

Mean Reversion

For the euro, the reversion levels are 1.1241 and 1.1214. The upper level sits only seven pips above the breakout point at 1.1234, so beginners should be especially careful. A single touch of the zone means very little. If price moves above 1.1234, reaches 1.1241, and closes there, that is a confirmed breakout and selling is not allowed. If instead it pokes 1.1241 and quickly returns below 1.1234, I would consider selling back toward the middle of the range. The lower level 1.1214 lies above the downside breakout point at 1.1193. Here, I expect price to dip briefly below 1.1214, fail to hold, and return; then I would look for long positions. I place the stop beyond the far edge of that zone, and if price closes below 1.1193, the setup is invalidated.

For the pound, the upper reversion level 1.3345 sits roughly eight pips above the buy breakout at 1.3337. If price moves above 1.3337, reaches 1.3345, and then quickly falls back, I would consider selling. If it closes above 1.3345, that is a confirmed breakout and selling is not allowed. The lower level 1.3305 is almost the same as the downside breakout point at 1.3307 — only two pips below, and two pips is just market noise. So I wouldn't rush in that zone because you cannot tell a breakout from a reversion on a single touch. First, I see where price stands a few minutes later. If it dipped below 1.3305, then quickly returned above 1.3307 and held there, longs with a stop under the low of that probe are appropriate. If it instead closes below, the reversion scenario has failed.