The euro, pound, and other risk assets fell sharply against the U.S. dollar without any objective reasons. Apparently, the brief weakness in the market during Jerome Powell's speech—which still did not guarantee a rate cut in September with 100% certainty—ended very quickly. Traders concluded that Powell said exactly what the White House wanted to hear, but how he will actually act will be shown by time and data.

The latest report recorded a decline in new home sales in the U.S. Considering that the dollar did not suffer much, market participants likely expected a more aggressive drop in the indicator.

In addition, the dollar's strengthening may be linked to rising concerns about geopolitical stability in the Middle East. In times of uncertainty, investors traditionally turn to the dollar as a safe-haven asset, which supports its value.

This morning, there are no data from the eurozone, so the EUR/USD pair will have a slight chance for recovery. However, this chance looks rather slim in light of the dominant factors weighing on the European currency. First, persistent uncertainty related to inflation and GDP growth continues to burden the euro. Second, the interest rate differential between the U.S. Federal Reserve and the European Central Bank still play an important role. Third, geopolitical tensions in Eastern Europe also negatively affect the euro. Proximity to the conflict zone, potential risks to energy security, and the impact of sanctions on the European economy all create additional uncertainty and limit euro growth.

As for the pound, Bank of England MPC member Catherine L. Mann is scheduled to speak this morning, and her remarks could provide some support to GBP/USD. However, the impact of her speech on the British currency will likely be limited by the broader factors currently exerting constant pressure on the pound.

If the data match economists' expectations, it is better to act using a Mean Reversion strategy. If the data come out much stronger or weaker than expected, the Momentum strategy is preferable.

Momentum Strategy (Breakout):

EUR/USD

Buying on a breakout of 1.1660 may lead to growth toward 1.1690 and 1.1737.

Selling on a breakout of 1.1630 may lead to a decline toward 1.1600 and 1.1567.

GBP/USD

Buying on a breakout of 1.3480 may lead to growth toward 1.3520 and 1.3560.

Selling on a breakout of 1.3445 may lead to a decline toward 1.3420 and 1.3390.

USD/JPY

Buying on a breakout of 147.90 may lead to growth toward 148.20 and 148.50.

Selling on a breakout of 147.50 may lead to a decline toward 147.20 and 146.90.

Mean Reversion Strategy (Pullbacks):

EUR/USD

I will look for selling opportunities after a failed breakout above 1.1663 with a return below this level.

I will look for buying opportunities after a failed breakout below 1.1612 with a return to this level.

GBP/USD

I will look for selling opportunities after a failed breakout above 1.3496 with a return below this level.

I will look for buying opportunities after a failed breakout below 1.3432 with a return to this level.

AUD/USD

I will look for selling opportunities after a failed breakout above 0.6499 with a return below this level.

I will look for buying opportunities after a failed breakout below 0.6465 with a return to this level.

USD/CAD

I will look for selling opportunities after a failed breakout above 1.3868 with a return below this level.

I will look for buying opportunities after a failed breakout below 1.3837 with a return to this level.