This might be easier and quicker to do if you customise the SharePoint list form with PowerApps.
In Power Automate, I assume you have a workflow that triggers when Target list item is created or modified. Then you need to
Get items -- specify the Source list
in the filter query, filter the SourceCategory field by the value in the current item. The query syntax is
FieldName eq 'Value you are looking for'
so in your case it might look like this, assuming the internal field name is Category
Category eq '<pick the category field from the dynamic content>'
This will return an array of results, even if there is only one result. If you are not comfortable with writing complex formulas in Power Automate, the simplest would now be to write the TestData1 and TestData2 values from the previous step into two variables. PA will automatically generate a loop and do that step for each returned record from the SourceList, but that's fine if there is only one result.
Next, Update Item, specify the Target List and the ID of the current item from the trigger body and set the category field from the value in the variable.