The euro and the Japanese yen managed to hold their positions against the dollar, while the British pound, despite strong inflation data in the UK, still declined by the end of the day.

Yesterday's hawkish Federal Reserve minutes from the previous meeting did not lead to a sharp rise in the dollar. Traders seem to have already priced in the Fed's wait-and-see stance, and the market reacted rather cautiously. Instead, we are seeing consolidation near current levels, indicating uncertainty about prospects.

This uncertainty is fueled by conflicting signals coming from the economy. On the one hand, inflation remains persistently high, which requires more aggressive action from the Fed. On the other hand, signs of slowing economic growth and labor market weakness are becoming increasingly evident, raising concerns about potential consequences. Under these conditions, market participants prefer to take a wait-and-see approach, evaluating incoming data and closely monitoring Fed officials' rhetoric.

Today, data on the eurozone consumer confidence index, the services PMI, and the composite PMI for August are expected. These indicators will provide insights into the current state of the regional economy and the sentiment of businesses and consumers. A low level of consumer confidence may indicate household concerns about inflation, interest rates, and employment prospects, potentially leading to reduced consumer spending and slower economic growth. In turn, a decline in the services PMI and the composite PMI could point to weaker activity in the services sector and a deterioration in the overall business climate. Poor data would only increase pressure on the euro.

As for the pound, the future dynamics of the currency pair will depend on the release of similar data for the UK. Special importance is attached to the PMI indices, as they serve as early indicators of economic conditions. A decline in these indicators could signal slower economic growth, which may negatively affect the pound. In particular, readings below 50 indicate a contraction in business activity, raising concerns about the outlook for the UK economy.

If the data matches economists' expectations, it is better to act based on a Mean Reversion strategy. If the data comes in much higher or lower than expected, the Momentum strategy is preferable.

Momentum Strategy (Breakout):

EUR/USD

Buying on a breakout above 1.1658 may lead to euro growth toward 1.1690 and 1.1730.

Selling on a breakout below 1.1625 may lead to a decline in the euro toward 1.1600 and 1.1567.

GBP/USD

Buying on a breakout above 1.3460 may lead to pound growth toward 1.3490 and 1.3527.

Selling on a breakout below 1.3445 may lead to a decline in the pound toward 1.3410 and 1.3375.

USD/JPY

Buying on a breakout above 147.60 may lead to dollar growth toward 147.90 and 148.20.

Selling on a breakout below 147.30 may lead to dollar sell-offs toward 147.00 and 146.65.

Mean Reversion Strategy (Pullbacks):

EUR/USD

I will look for selling opportunities after a failed breakout above 1.1659 with a return below this level.

I will look for buying opportunities after a failed breakout below 1.1639 with a return above this level.

GBP/USD

I will look for selling opportunities after a failed breakout above 1.3466 with a return below this level.

I will look for buying opportunities after a failed breakout below 1.3439 with a return above this level.

AUD/USD

I will look for selling opportunities after a failed breakout above 0.6441 with a return below this level.

I will look for buying opportunities after a failed breakout below 0.6413 with a return above this level.

USD/CAD

I will look for selling opportunities after a failed breakout above 1.3884 with a return below this level.

I will look for buying opportunities after a failed breakout below 1.3870 with a return above this level.