The dollar continues to strengthen actively against riskier assets.

Yesterday, two reports from the U.S. came in weaker than expected, but the dollar essentially ignored them. The ISM manufacturing index fell to 54.6% from 55.6%, remaining in the growth zone for the eighth consecutive month; however, almost all components, including new orders, order backlogs, employment, and imports, declined. It's worth noting that the ISM index reflects the state of the industry and usually influences expectations for Federal Reserve rates, but this time the data's weakness did not play its usual role. The labor market report reinforced the picture of cooling, as job openings dropped to 5.1 million from 7.3 million, and employers simultaneously hired fewer and also laid off fewer workers. Nevertheless, the dollar remained unfazed, as market attention shifted to the Strait of Hormuz. The U.S. struck an island in the strait, and Iran responded in kind.

This development has posed unfavorable conditions for the euro and pound. The rising geopolitical premium for the dollar and the threat of escalating oil prices are weighing on both European currencies, which are dependent on energy imports, causing EUR/USD and GBP/USD to come under pressure.

Today, in the first half of the day, the Eurozone's agenda will be limited to data on changes in Spain's unemployment rate. This figure reflects the state of the labor market in one of the bloc's major economies; however, it is secondary and significantly less important than broader European reports on inflation or business activity. It is unlikely to play a crucial role in determining the euro's direction, meaning it will not provide a standalone impulse for the single currency. Given this weak backdrop, a slight recovery in the EUR/USD pair after the Asian sell-off is anticipated.

Similarly, there are no data for the pound today, so in the absence of significant data, the initiative shifts to external factors. In a calm environment, the euro, pound, and other risk assets could recover some of their recent losses. However, the sustainability of this rebound will depend on the dollar's behavior, which remains strong amid geopolitical tensions, making it difficult to expect a full reversal without its weakening.

If the data aligns with economists' expectations, it's better to act based on the Mean Reversion strategy. If the data turns out significantly higher or lower than economists' forecasts, the Momentum strategy should be employed.

Momentum Strategy (Breakout):

For the EUR/USD Pair

Buy on a breakout above the level of 1.1590, which may lead to a rise towards 1.1609 and 1.1623;

Sell on a breakout below the level of 1.1568, which may cause a drop towards 1.1553 and 1.1534;

For the GBP/USD Pair

Buy on a breakout above the level of 1.3501, which may lead to a rise towards 1.3527 and 1.3550;

Sell on a breakout below the level of 1.3475, which may result in a decline towards 1.3457 and 1.3435;

For the USD/JPY Pair

Buy on a breakout above the level of 159.85, which may lead to a rise towards 160.13 and 160.43;

Sell on a breakout below the level of 159.60, which may trigger a decline in dollar strength towards 159.39 and 159.13;

Mean Reversion Strategy (Return):

For the EUR/USD Pair

I will look for short positions after a failed breakout above 1.1592 when the price returns below this level;

I will look for long positions after a failed breakout below 1.1570 when the price returns to this level;

For the GBP/USD Pair

I will look for shorts after a failed breakout above 1.3514 when the price returns below this level;

I will look for longs after a failed breakout below 1.3491 when the price returns to this level;

For the AUD/USD Pair

I will look for shorts after a failed breakout above 0.7155 when the price returns below this level;

I will look for longs after a failed breakout below 0.7127 when the price returns to this level;

For the USD/CAD Pair

I will look for shorts after a failed breakout above 1.3935 when the price returns below this level;

I will look for longs after a failed breakout below 1.3895 when the price returns to this level;