Getting to some facts:
It takes around 21 days of muscular non-use for atrophy to set in.
Lower body fat levels are best accomplished by metabolic activation via HIIT, and by bringing your calories UP. The flame burns hotter with more fuel. However,....you need to burn slightly more calories than you consume to get lean over a period of weeks. I'll diet for up to 24 weeks headed into a contest, but, I don't lose more than about 10% of my total weight, and often gain a bit of muscle going in.
Losing 10 pounds in the beginning is simply glycogen de-loading. It'll make you a bit lighter, and make you look a bit leaner, but, less full, less energetic. It's just water and some glucose and happens to everyone.
Your calorie requirements will vary contingent to your activity level, BMR (influenced by hormone levels and lean muscle mass), eating methodololgies. It's not the same for any two folks.
It's all science, and you tweak it by observation, and adjustments.
Download the PCS20 calorie calculator from the USDA.
Get a digital scale at any Office Depot (used for postage).
Track every bit of food that goes in your mouth.
Track every bit of your workout.
Track your weight every day.
Take pictures, and measurements, cold.
Go to the pharmacy and get some Ketostix.
Maintain your calories just above, but not below, ketosis. You don't need to be dumping ketones as that means you're starving, or have blood sugar issues (another topic under diabetes).
Report it here.
That's a beginning spot, but, to really get down to business, you need to hire someone who knows what they are doing to guide, you, or you need to research this on any of a number of good bodybuilding sites.
From your picture, I sure wouldn't sabotage the work you've done. You really don't want to drop much weight if you're 195 now. You'll look terrible if you do.
Under all circumstances, continue your resistance training to preserve your lean muscle mass. Only lean muscle burns calories at rest. ONLY resistance training increases your lean muscle mass, strengthens your bones, conditions your nerves, as YOU GROW OLDER. Resistance training is essential to aging gracefully.
I've given you a plan to examine, study, modify, and execute for success. Now, you just need to go do it.
Once you get the first part of your plan done here, we'll look into carb cycling, and a more advanced approach, but, the first thing we need to do is for you to step up and commit to the plan.
It's hard to give qualified advice without knowing the details of the workout. You'll have to provide that if you need more.
Here's a screenshot of my food log for 20070729, where the fat was a bit higher than normal, but, I was hungry, and active, and it was JUST what I need and I looked like a million bucks the next morning. For whatever reason, on this day, I couldn't seem to get my blood sugar where I wanted it and nudged it with simple carbs (sugar) a couple of times. As I remember, I had really blasted it for several days in a row.