The dollar has been hit again. Losses are broad based, with most emerging market currencies participating, though the Mexican peso is a clear laggard as concerns about the budget (and therefore rating) implications of last week's elections. The main driver appears to be players being stopped out of short foreign currency positions, which had been the trend since the start of the month. Some momentum players are getting long the foreign currencies. While the gains in the foreign currencies look impressive, they are still mired in the ranges that have plagued players since late May.
The combination of market positions and momentum warn not to fade this move yet as there will likely be follow through today. Also today, France, Italy, Greece and Netherlands report industrial production data and this data will likely be seen as consistent with the "green shoots" story. The US reports trade figures, which given the rise in oil prices may deteriorate, and Univ of Michigan preliminary measure of consumer confidence for July. Risk is a bit of slippage from the 70.8 reading in June. These reports should not stand in the way of additional dollar selling--near-term. Despite the dollar's firmer tone since the start of the month, sentiment remains largely negative.