The euro and the pound continue to lose against the US dollar, just as the Japanese yen and other risk assets.

The strengthening of the dollar, fueled by declining inflation in the eurozone and protectionist measures undertaken by the Trump administration, has created a complicated situation for the European economy. While the sharp drop in inflation is a positive long-term signal, it has weakened the euro in the short term by raising expectations of more aggressive rate cuts by the European Central Bank.

At the same time, Trump's decision to double tariffs on steel and aluminum imports from 25% to 50% has delivered another blow to the European currency and other risk assets. Such measures, aimed at protecting American manufacturers, inevitably lead to retaliatory actions from trade partners, including the European Union, fueling trade wars and increasing uncertainty in global markets.

Today, weak PMI data for the eurozone services sector and the composite PMI are expected in the first half of the day, which could further pressure the euro. Similarly weak data is expected from the UK, so the pound's chances of growth are incredibly slim.

Traders typically pay close attention to these indicators, as they provide valuable information about the economy's current state and allow for forecasts of its future development. If the PMI data comes in below expectations, it could confirm fears of slowing economic growth in the region and trigger further selling of the euro and the pound.

An aggravating factor is the ongoing uncertainty surrounding trade relations between the US and the EU. European authorities have until July 9 to reach a trade agreement, after which, according to politicians, predatory tariffs will apply.

If the data matches economists' expectations, following a Mean Reversion strategy is better. If the data significantly exceeds or falls short of expectations, the best approach is to use a Momentum strategy.

Momentum Strategy (Breakout):

EUR/USD

Buying on a breakout of 1.1374 could lead to growth toward 1.1400 and 1.1430;

Selling on a breakout of 1.1353 could lead to a decline toward 1.1314 and 1.1270.

GBP/USD

Buying on a breakout of 1.3521 could lead to growth toward 1.3545 and 1.3589;

Selling on a breakout of 1.3497 could lead to a decline toward 1.3473 and 1.3450.

USD/JPY

Buying on a breakout of 144.45 could lead to growth toward 144.75 and 145.20;

Selling on a breakout of 144.08 could lead to a decline toward 143.73 and 143.25.

Mean Reversion Strategy (Pullbacks):

EUR/USD

Look for selling opportunities after a failed breakout above 1.1399 with a return below that level;

Look for buying opportunities after a failed breakout below 1.1358 with a return above that level.

GBP/USD

Look for selling opportunities after a failed breakout above 1.3545 with a return below that level;

Look for buying opportunities after a failed breakout below 1.3501 with a return above that level.

AUD/USD

Look for selling opportunities after a failed breakout above 0.6481 with a return below that level;

Look for buying opportunities after a failed breakout below 0.6450 with a return above that level.

USD/CAD

Look for selling opportunities after a failed breakout above 1.3728 with a return below that level;

Look for buying opportunities after a failed breakout below 1.3703 with a return above that level.