The dollar lost all its advantage against risk assets and pulled back sharply.

Yesterday, the dollar fell in response to news that the US private sector created only 38,000 jobs in August, the lowest since January. The ADP report is considered an early indicator for the labor market, so such a weak result immediately weakened arguments for Federal Reserve hawkishness and removed support for the dollar. The structure proved more interesting: goods production lost 10,000 jobs, while the entire gain was driven by education and healthcare, which added 45,000 jobs. The worst sector was manufacturing, at minus 17,000, followed by professional and business services, at minus 16,000. Equally strange was the breakdown by company size: small businesses and large corporations were hiring, while firms with 20–49 employees cut 17,000 jobs at once.

For the euro and the pound, the dollar's weakening became support, and both European currencies strengthened. A weak labor market reduces the Fed's reasons for toughness, especially since the central bank shifted its focus to data after Jackson Hole. Nevertheless, the key resolution will be Friday's official employment report, on which it will depend whether this sentiment holds.

Today in the first half of the day, attention on the single currency will be drawn by the final estimates of the services PMI for the eurozone and the composite PMI, as well as the producer price index. PMI indices are based on company surveys and reflect the state of business activity, with the 50-point mark separating expansion from contraction, with services accounting for the main share of the bloc's economy. The producer price index shows the dynamics of factory gate prices and serves as an early signal of inflation, since rising costs eventually pass through to consumer prices.

Given that inflation in the eurozone has already returned to growth, accelerating to 3.3% in August, a jump in producer prices combined with strong PMI data could strengthen the euro against the dollar. Such a combination would bolster arguments for European Central Bank hawkishness, especially as the market has almost fully priced in a rate hike at the September 10 meeting, and Isabel Schnabel has explicitly spoken about the need for further tightening. If the data confirm this sentiment, EUR/USD will have grounds to rise.

As for the pound, in the first half of the day today, attention will focus on final data for the services PMI in the United Kingdom and the composite PMI. The services index is especially important for the British currency, since this sector accounts for the largest share of the country's economy, and the composite indicator combines services and manufacturing, providing a fuller picture of business activity. Because revised values are being published, the key will be which way preliminary estimates are revised.

An upward revision will reinforce belief in the strength of the services sector and support the pound, especially since it has already returned to growth earlier, whereas a deterioration in estimates will reapply pressure on GBP/USD.

If the data align with economists' expectations, it is better to act on a Mean Reversion strategy. If the data are much higher or lower than economists' expectations, it is best to use a Momentum strategy.

Momentum Strategy (breakout):

For the EURUSD pair

Buying on a breakout of 1.1608 may push the euro toward 1.1623 and 1.1641;

Selling on a breakout of 1.1584 may push the euro down toward 1.1568 and 1.1550;

For the GBPUSD pair

Buying on a breakout of 1.3494 may push the pound toward 1.3512 and 1.3531;

Selling on a breakout of 1.3475 may push the pound down toward 1.3457 and 1.3435;

For the USDJPY pair

Buying on a breakout of 157.69 may push the dollar toward 159.97 and 158.28;

Selling on a breakout of 157.40 may lead to dollar sell-offs toward 157.05 and 156.73;

Mean Reversion Strategy (on pullback):

For the EURUSD pair

I will look to sell after a failed move above 1.1605 on a return below that level;

I will look to buy after a failed move above 1.1583 on a return to that level;

For the GBPUSD pair

I will look to sell after a failed move above 1.3502 on a return below that level;

I will look to buy after a failed move above 1.3475 on a return to that level;

For the AUDUSD pair

I will look to sell after a failed move above 0.7177 on a return below that level;

I will look to buy after a failed move above 0.7161 on a return to that level;

For the USDCAD pair

I will look to sell after a failed move above 1.3844 on a return below that level;

I will look to buy after a failed move above 1.3819 on a return to that level;