The euro held its ground, while the British pound experienced a major sell-off yesterday, driven by clear reasons.

Pressure on the dollar surged sharply following the release of ADP Research data, which showed that private sector employment in the U.S. declined by 33,000 in June. This came as a surprise to economists and traders, who had forecast an increase of 112,000 jobs. The decline in private sector employment heightened concerns about slowing economic growth in the U.S. and its potential impact on Federal Reserve policy. Job losses were mainly concentrated in small businesses, suggesting potential difficulties in adapting to changing economic conditions. Meanwhile, large corporations remained relatively resilient, likely due to their broader resources and adaptability.

While the euro rose following the weak U.S. labor market report, the pound plummeted amid reports that the UK budget deficit could range from £8 to £22 billion. This unexpected financial crisis, coming on top of ongoing concerns about inflation and economic prospects, triggered a sharp drop in the pound, weakening its position against both the U.S. dollar and the euro.

Today, in the first half of the day, fairly positive data are expected for the services PMI indices of the eurozone and the UK, along with composite PMI indices. In theory, this could help the euro and pound recover some ground. Additionally, the European Central Bank monetary policy meeting minutes will be released.

Markets are eagerly awaiting these reports, as they could provide valuable insights into the current state of the eurozone economy and the intentions of the ECB and Bank of England. PMI indices serve as leading indicators of economic activity, reflecting the sentiment of purchasing managers in key sectors. Readings above 50 indicate expansion, while readings below 50 signal contraction. Special emphasis will be placed on trends within the services sector, which is the dominant sector in the UK economy.

Meanwhile, the ECB meeting report will offer a more detailed look at internal discussions within the central bank. Traders will be looking for clues about the future direction of monetary policy, including potential changes in interest rates. Special attention will be paid to the ECB's assessment of inflation risks and economic growth outlook.

If the data aligns with economists' expectations, it is advisable to rely on the Mean Reversion strategy. If the data turns out to be significantly above or below forecasts, the Momentum strategy would be more effective.

Momentum Strategy (Breakout):

EUR/USD

Buying on a breakout above 1.1805 may lead to a rise toward 1.1855 and 1.1875

Selling on a breakout below 1.1785 may lead to a decline toward 1.1749 and 1.1690

GBP/USD

Buying on a breakout above 1.3640 may lead to a rise toward 1.3685 and 1.3710

Selling on a breakout below 1.3610 may lead to a drop toward 1.3565 and 1.3530

USD/JPY

Buying on a breakout above 144.10 may lead to a rise toward 144.50 and 144.90

Selling on a breakout below 143.66 may lead to dollar sell-offs toward 143.25 and 142.79

Mean Reversion Strategy (Pullbacks):

EUR/USD

Look for selling opportunities after a failed breakout above 1.1819 with a return below this level

Look for buying opportunities after a failed breakout below 1.1781 with a return above this level

GBP/USD

Look for selling opportunities after a failed breakout above 1.3666 with a return below this level

Look for buying opportunities after a failed breakout below 1.3610 with a return above this level

AUD/USD

Look for selling opportunities after a failed breakout above 0.6590 with a return below this level

Look for buying opportunities after a failed breakout below 0.6560 with a return above this level

USD/CAD

Look for selling opportunities after a failed breakout above 1.3606 with a return below this level

Look for buying opportunities after a failed breakout below 1.3577 with a return above this level