The Australian dollar continued to forge higher overnight assisted by a generally positive demeanor across global markets. Notably the EURAUD pair has now made a convincing break below 1.25-figure with the pair maintaining a slow and steady downward trajectory. Although the momentum appears to be in the Aussies favor, the pair is in uncharted territory with no previous technical milestones to guide the way.

Across the Tasman the Kiwi was also a prime beneficiary with strength against the US dollar and new all time highs against the Euro. The local unit gain upside momentum yesterday with local building approval numbers and a stronger than anticipated Chinese trade surplus providing a solid platform. Although the Chinese data was stronger than anticipated, the data showed the surplus continues to narrow. In essence this can be seen as a positive, given it provides license for Chinese officials to further relax their previous measures taken to combat inflationary forces.

Meanwhile, the Euro remained left behind to swallow the dust of other risk currencies and higher yielding assets. Strength across risk assets provided natural resistance for the greenback which recorded losses against major counterparts with the commodity trio - the Aussie, CAD and Kiwi leading the charge.

Ratings agency Fitch warned of a possible downgrade of Italy but reaffirmed France's top rating. Market participants also mustered some inspiration from Fitch's Managing Director David Riley who stated The unwinding of the imbalances that led to the crisis is well underway, and the headwinds should begin to ease toward the end of the year.

Locally, the Aussie dollar has just broken the downside of 103 US cents, we expect any short-term weakness to be contained around previous support of 102.75 US cents in the domestic session. At the time of writing the Aussie dollar is buying 102.95 US cents.