The dollar is facing challenges. Yesterday, the Federal Open Market Committee voted to lower the key interest rate by a quarter percentage point, leading to a weakening of the dollar and a strengthening of several risk assets, including the Japanese yen.

The Federal Reserve's decision was the result of prolonged debates about the state of the US economy. Proponents of the rate cut argued that the slowdown in labor market growth and global uncertainty necessitated the easing of monetary policy to stimulate economic activity. Conversely, opponents were concerned that a rate cut could lead to rising inflation and financial instability. However, it should be noted that there were only two such opponents. The market reaction to the Fed's actions was immediate. The US dollar sharply fell against major currencies, particularly against the euro, which strengthened to a several-month high.

Today, only the quarterly unemployment rate in Italy and a Eurogroup meeting are expected in the morning. The upcoming publication of unemployment data in Italy is unlikely to significantly impact market sentiment. Only a higher-than-expected unemployment rate could raise concerns about economic growth and potentially lead to a slight decline in the euro's value. Concurrently, the Eurogroup meeting promises to be a platform for discussing key issues regarding the economic situation in the eurozone, likely focusing on fiscal policy, coordination of efforts to stimulate economic growth, and inflation management. Discussions may also revolve around plans to further support countries facing economic difficulties.

Regarding the UK and the pound, Bank of England Governor Andrew Bailey is set to speak in the morning. His comments are expected to shed light on the prospects of the BoE's monetary policy. Traders will be especially attentive to his assessment of the UK's current economic state, given recent inflation and labor market data. Special attention will be paid to signals regarding possible future actions by the BoE concerning interest rate cuts.

If the data aligns with economists' expectations, it is advisable to act based on the Mean Reversion strategy. If the data significantly deviates from economists' forecasts, the Momentum strategy would be more appropriate.

Momentum Strategy (Breakout):

For the EUR/USD Pair

• Long positions on a breakout of level 1.1706 could lead to an increase in the euro to around 1.1726 and 1.1753.
• Shorts on a breakout of level 1.1676 could lead to a decline in the euro to around 1.1649 and 1.1619.

For the GBP/USD Pair

• Longs on a breakout of level 1.3389 could lead to an increase in the pound to around 1.3416 and 1.3440.
• Shorts on a breakout of level 1.3352 could lead to a decline in the pound to around 1.3320 and 1.3287.

For the USD/JPY Pair

• Longs on a breakout of level 156.12 could lead to an increase in the dollar to around 156.55 and 156.94.
• Shorts on a breakout of level 155.75 could lead to a sell-off of the dollar to around 155.41 and 155.08.

Mean Reversion Strategy (Retracement):

For the EUR/USD Pair

• Look for shorts after a failed breakout above 1.1716 on a return below this level.
• Look for longs after a failed breakout above 1.1680 on a return to this level.

For the GBP/USD Pair

• Look for shorts after a failed breakout above 1.3399 on a return below this level.
• Look for longs after a failed breakout above 1.3350 on a return to this level.

For the AUD/USD Pair

• Look for shorts after a failed breakout above 0.6663 on a return below this level.
• Look for longs after a failed breakout above 0.6614 on a return to this level.

For the USD/CAD Pair

• Look for shorts after a failed breakout above 1.3830 on a return below this level.
• Look for longs after a failed breakout above 1.3791 on a return to this level.