A small check-up

It's how I would call the sell-off in risk assets that has followed Dubai's announcement. As a result of this check-up, - everything is in place and working: firstly sell emerging countries debt, stocks and currencies, simultaneously buy dollar and contracts on US government bonds. Fine, mission accomplished!
By its self, even the Dubai's default is far from being able to put in danger the world's financial system as it was the case with Lehman Brothers. What is more important it's the reminder to an average investor: "Ok, here in US, Europe, Japan, things are ugly and you can't earn anything on your money, but  be careful when you go outside! Even if it looks great (as Dubai did) it can hurt badly and you'll loose about everything."

Now let's look at currencies. Bellow are two of them : the  Euro, something like a big cap (of DOW Industrial index) and a "high beta small cap" - Australian dollar. And in this space the flight to quality is obvious.

As we can see for EUR/USD, the sell-off wasn't able to push bellow the red trend line. It's certainly a sign of strength and resilience for the single currency. Until this trend line resists we're still able to push higher, toward the upper trend line (1.537) . And seeing what is happening with gold, I consider it as a high probability event.

As for the Aussie, I'm happy that my call was confirmed. We have pierced and later busted the supportive red trend line as well as 55 days exponential moving average. That's serious. While AUD/USD have to go under 0.89 to confirm it's down trend, I think, before, it may take some time to consolidate in the 0.89-0.94 range.