The euro and pound continued to rise, along with other risky assets, while the US dollar weakened, which is not surprising - especially given such data.

Weak ADP employment data and poor ISM services activity figures were the main reasons for the dollar's sharp decline. Traders, concerned about a potential recession in the US economy due to tariffs, rushed to dispose of dollar assets, shifting instead into what they consider safer European assets.

This trend intensified amid expectations regarding the Federal Reserve's future policy. The market believes that given the weak ADP report and other disappointing data, the Fed might resort to cutting interest rates sooner than expected. Meanwhile, the European Central Bank might announce today that it is taking a pause in its policy easing cycle.

Geopolitical factors also influence the currency markets. Uncertainty surrounding tariffs continues to create volatility, but the euro has shown relative resilience in recent weeks. This may be due to the European economy adapting to the new realities.

Germany's industrial orders and the Eurozone's producer price index data will be released in the first half of the day. However, the ECB's decision on the key interest rate and Christine Lagarde's press conference will be the most important event. Markets are holding their breath, wondering how decisive the central bank will be after inflation recently dropped to 1.9%. A rate cut is expected, but what follows remains a complicated question. Special attention will be given to Christine Lagarde's rhetoric. Traders are eager to hear specific signals about the future trajectory of ECB monetary policy. Will the central bank stick to a dovish path, or will it adopt a more cautious stance, assessing the effects of previous cuts on the economy? The future dynamics of the euro will depend on these decisions and comments.

As for the pound, this morning, the UK construction PMI data will be published, and Sarah Breeden, a member of the Bank of England's Financial Policy Committee, will be giving a speech. The PMI results are expected to attract special attention as they provide insights into the health of the construction industry, a key indicator of the country's economic situation. A decline in the index could indicate reduced activity, likely raising concerns about economic growth prospects.

If the data matches economists' expectations, relying on the Mean Reversion strategy is better. If the data turns out to be much higher or lower than expected, the best approach would be to use the Momentum strategy.

Momentum Strategy (Breakout):

EUR/USD

Buying on a breakout of 1.1427 could lead to a rise toward 1.1460 and 1.1500.

Selling on a breakout of 1.1395 could lead to a decline toward 1.1360 and 1.1314.

GBP/USD

Buying on a breakout of 1.3562 could lead to a rise toward 1.3589 and 1.3626.

Selling on a breakout of 1.3535 could lead to a decline toward 1.3500 and 1.3470.

USD/JPY

Buying on a breakout of 143.25 could lead to a rise toward 143.75 and 144.10.

Selling on a breakout of 143.00 could lead to a drop toward 142.70 and 142.45.

Mean Reversion Strategy (Pullbacks):

EUR/USD

I will look for sells after a failed breakout above 1.1435 and a return below that level.

I will look for buys after a failed breakout below 1.1399 and a return above that level.

GBP/USD

I will look for sells after a failed breakout above 1.3565 and a return below that level.

I will look for buys after a failed breakout below 1.3533 and a return above that level.

AUD/USD

I will look for sells after a failed breakout above 0.6513 and a return below that level.

I will look for buys after a failed breakout below 0.6483 and a return above that level.

USD/CAD

I will look for sells after a failed breakout above 1.3686 and a return below that level.

I will look for buys after a failed breakout below 1.3665 and a return above that level.