Yesterday, the US dollar demonstrated a mixed performance: it significantly weakened against the euro, while maintaining its positions against the pound and the Canadian dollar.

Pressure on the dollar intensified after the US consumer confidence indicator for July fell to 90.8 points, versus a forecast increase to 92.4 points. This indicator reflects Americans' assessment of the current state of the economy and their financial prospects, and since consumer spending constitutes a major part of the US economy, a weakening of sentiment is considered a troubling sign. The unexpected decline undermined expectations of sustained demand and weakened arguments for a hawkish Federal Reserve, which weighed on the US currency. For the euro and pound, this backdrop provided support.

Today, the European agenda in the first half of the day is limited to the release of Germany's import price index. This indicator reflects changes in the cost of imported goods and serves as an early signal of inflationary pressure since rising import costs eventually translate into consumer prices. Through this channel, it indirectly affects expectations regarding the European Central Bank's policy; however, its significance is noticeably inferior to flagship reports on inflation and business activity, and therefore it usually does not cause a strong response for the single currency. This is why it seems unlikely that the bullish trend for the euro will continue today. Without significant internal drivers, the EUR/USD pair will find it challenging to build on its recent gains, and its dynamics in the first half of the day will depend on sentiment regarding the dollar.

As for the pound, data on the number of approved mortgage applications in the UK, the volume of net lending to individuals, and changes in the M4 money supply are expected in the first half of the day. In the absence of significantly positive news, any deviation from the expected figures will likely lead to a decline in the British currency. Economists expect the current economic situation to limit strong growth in the indicators, so traders should be extremely cautious when trading the British pound.

If the data meets economists' expectations, it is best to act based on the Mean Reversion strategy. If the data comes in much higher or lower than expectations, the Momentum strategy will be the most suitable.

Momentum Strategy (Breakout):

For EUR/USD

• Buy on a breakout of 1.1405 may lead to a rise in the euro to around 1.1419 and 1.1435;
• Sell on a breakout of 1.1384 may lead to a drop in the euro to around 1.1369 and 1.1355;

For GBP/USD

• Buy on a breakout of 1.3309 may lead to a rise in the pound to around 1.3334 and 1.3360;
• Sell on a breakout of 1.3280 may lead to a drop in the pound to around 1.3260 and 1.3240;

For USD/JPY

• Buy on a breakout of 163.76 may lead to a rise in the dollar to around 163.99 and 164.26;
• Sell on a breakout of 163.48 may lead to a decline in the dollar to around 163.18 and 162.92;

Mean Reversion Strategy (Reversion):

For EUR/USD

• Look to sell after a failed breakout above 1.1410 on a return below this level;
• Look to buy after a failed breakout below 1.1385 on a return to this level;

For GBP/USD

• Look to sell after a failed breakout above 1.3308 on a return below this level;
• Look to buy after a failed breakout below 1.3281 on a return to this level;

For AUD/USD

• Look to sell after a failed breakout above 0.6972 on a return below this level;
• Look to buy after a failed breakout below 0.6945 on a return to this level;

For USD/CAD

• Look to sell after a failed breakout above 1.4097 on a return below this level;
• Look to buy after a failed breakout below 1.4078 on a return to this level;