The euphoria over another Trump deal with Iran and the positive data from European PMI indices quickly faded.

During the American session, the dollar returned to growth following a strong report on American manufacturing, which expanded in July at the fastest pace in more than four years. The ISM Manufacturing PMI index stood at 55.6 percent, rising 2.3 points from June's 53.3 and significantly exceeding the consensus forecast of around 54 percent. Recall that this index is based on surveys of purchasing managers and reflects the state of the manufacturing sector, where a value above 50 points indicates growth, thus affirming the strength of the economy and strengthening the dollar.

Strong data supported arguments for tighter Federal Reserve policy, as the revival of the manufacturing sector reduced the need for easing, thereby increasing the attractiveness of the U.S. currency. For the euro and pound, such a backdrop turned into pressure, and both European currencies lost ground.

Today, the European agenda looks sparse in the first half of the day, featuring only retail sales data from Italy and changes in Spain's unemployment rate. Retail sales reflect consumer activity and indirectly indicate the state of demand in the economy. At the same time, unemployment data characterize the labor market in one of the bloc's major countries. However, both indicators are secondary and significantly less important than Eurozone-wide reports on inflation or business activity, and thus usually do not cause a strong response in the single currency.

This is why one should not expect significant movement in the euro during the first half of the day. Without substantial internal drivers, the EUR/USD pair will likely remain aligned with broader market sentiment and orient itself to dollar dynamics, rather than reacting to the releases themselves. For a new impulse, the single currency would require either an unexpectedly strong signal from the region or a weakening of the American currency.

On the other hand, there are no important fundamental data from the UK today, so buyers of the pound will have a chance for a slight recovery in the pair. The absence of significant economic news from the United Kingdom creates a vacuum that could be filled with technical factors and speculative sentiments. In such conditions, even minor positive signals or changes in trader sentiment could lead to a short-term strengthening of the British pound against major currencies.

If the data aligns with economists' expectations, it is best to act based on the Mean Reversion strategy. If the data significantly exceeds or falls short of economists' expectations, it would be best to use the Momentum strategy.

Momentum Strategy (Breakout):

For the EUR/USD Pair

Longs on a breakout above 1.1531 may lead to an increase in the euro to around 1.1557 and 1.1592;

Shorts on a breakout below 1.1504 may lead to a decrease in the euro to around 1.1482 and 1.1457;

For the GBP/USD Pair

Longs on a breakout above 1.3435 may lead to an increase in the pound to around 1.3467 and 1.3503;

Shorts on a breakout below 1.3410 may lead to a decrease in the pound to around 1.3400 and 1.3365;

For the USD/JPY Pair

Longs on a breakout above 157.93 may lead to an increase in the dollar to around 158.28 and 158.57;

Shorts on a breakout below 157.40 may lead to a sell-off of the dollar to around 157.05 and 156.73;

Mean Reversion Strategy:

For the EUR/USD Pair

I will look for shorts after a failed breakout above 1.1519 upon returning below this level;

I will look for longs after a failed breakout below 1.1497 upon returning to this level;

For the GBP/USD Pair

I will look for shorts after a failed breakout above 1.3440 upon returning below this level;

I will look for longs after a failed breakout below 1.3405 upon returning to this level;

For the AUD/USD Pair

I will look for shorts after a failed breakout above 0.7035 upon returning below this level;

I will look for longs after a failed breakout below 0.7013 upon returning to this level;

For the USD/CAD Pair

I will look for shorts after a failed breakout above 1.4054 upon returning below this level;

I will look for longs after a failed breakout below 1.4038 upon returning to this level;