While the globe is bearish on the dollar and buying into the reflation trade, there remains a certain reluctance on the part of traders to push markets too dramatically. Maybe it is because markets are thinned by summer holidays in the Northern hemisphere; maybe it is a nagging suspicion that the final demand may not be as robust as market momentum implies. Either way, currency gains remain measured and not explosive.
Case in point is the Canadian dollar. The Loonie retested USD lows around 1.0780 first thing this morning but the buck soon rebounded back above 1.0800. AUD/USD continues to advance but continued chatter of “s,oothing actions” from the RBA (selling AUD/USD) is helping slow that pair’s advance, though it reached 0.8259 earlier today.
Slow and steady wins the race but it drives longs crazy; they want their winnings NOW. Look for slow and steady to continue so long as equities continue their grind higher. If they don’t, look for late-comers to the party bailout of longs, giving more patient traders better entry points.
