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Aussie and Kiwi Bid Higher as Global Equity Markets Rally

Aussie and Kiwi Bid Higher as Global Equity Markets Rally

2011-09-07 13:52:00
Christopher Vecchio, CFA, Sr. Currency Strategist
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Fundamental Headline

Banks Got $15B ‘Subsidy’ on U.S. Guarantee – Bloomberg

Obama Said to Seek $300 Billion Jobs Package – Bloomberg

Risk Assets Snap September Slump – Financial Times

Court Curbs German Ability to Act Fast on Debt Crisis – Reuters

Bernanke Takes on a Balancing Act – WSJ

European Session Summary

Risk-appetite was boosted throughout the European session after the top German court rejected constitutional challenges to Germany’s participation in the European Financial Stability Facility (EFSF). The EFSF has been the purse that Euro-zone officials have reached into to help provide the funds necessary for providing support to the heavily indebted periphery countries. The decision initially boosted the Euro against the U.S. Dollar, but a second glance over the ruling evoked fear among market participants. While Germany is still allowed to participant in the fund, the court ruled that a parliamentary budgetary committee would need to approve future decisions, potentially hampering Germany’s ability to assist weaker Euro-zone members.

EUR/USD 1-minute Chart: September 7, 2011

Aussie_and_Kiwi_Bid_Higher_as_Global_Equity_Markets_Rally_body_Picture_1.png, Aussie and Kiwi Bid Higher as Global Equity Markets Rally

Charts created using Strategy Trader– Prepared by Christopher Vecchio

Despite the pullback in the Euro, risk-appetite remained higher, as equity markets around the globe moved towards sessions as the North American session was set to open. At the time this report was written, German bourse had gained over 3 percent, while the other major indexes, save the Spanish exchange, were all up over 2 percent. Likewise, the Australian Dollar and the New Zealand Dollar, the two highest yielding major currencies, were up over 1 percent each against the U.S. Dollar.

AUD/USD 1-minute Chart: September 7, 2011

Aussie_and_Kiwi_Bid_Higher_as_Global_Equity_Markets_Rally_body_Picture_4.png, Aussie and Kiwi Bid Higher as Global Equity Markets Rally

Charts created using Strategy Trader– Prepared by Christopher Vecchio

The U.S. Dollar, in recent days and weeks, has not only been bid higher on demand for safety, but also the need for liquidity. The U.S. Dollar remains the world’s most liquid fiat currency, and in light of the Swiss National Bank’s decision to implement an exchange rate floor for the Swiss Franc against the Euro, the Greenback appears to be a likely candidate to appreciate in the coming months as one of the few remaining safe haven options.

Thus far, on Wednesday, the Dow Jones FXCM Dollar Index is lower, trading at 9588.02, at the time this report was written, after opening at 9629.91. The index has traded only to the downside today, with the high at the open and the low at 9550.45.

24-Hour Price Action

Aussie_and_Kiwi_Bid_Higher_as_Global_Equity_Markets_Rally_body_Picture_5.png, Aussie and Kiwi Bid Higher as Global Equity Markets RallyAussie_and_Kiwi_Bid_Higher_as_Global_Equity_Markets_Rally_body_Picture_6.png, Aussie and Kiwi Bid Higher as Global Equity Markets Rally

Key Levels: 13:30 GMT

Aussie_and_Kiwi_Bid_Higher_as_Global_Equity_Markets_Rally_body_Picture_7.png, Aussie and Kiwi Bid Higher as Global Equity Markets Rally

Written by Christopher Vecchio, Currency Analyst

To contact the author of this report, please send inquiries to: cvecchio@dailyfx.com

Follow Christopher Vecchio on Twitter: @CVecchioFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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