Risk-on Weighed on US Dollar Value Late on Thursday, Steady Trading Early on Friday - 9.8.2013

Currency markets have been rather quiet with major pairs extending into tight sideways early on Friday. On Thursday risk appetite was supported by increase in Chinese imports and later on the day US Jobless Claims barely changed. Claims stood at 333K the previous week up compared to 328K two weeks ago and 3,000 lower than anticipated with no impact on markets.

Global indices have been in positive ground indicating improved risk sentiment. The US dollar index eased yesterday to 80.84 as investors were looking for higher yielding currencies while on Friday morning made technical correction to resistance at 81.05. Chinese CPI reading was below expectations providing room for its government to enhance stimulus, in addition Chinese Industrial Production increased by 9.7% in July, more than expected at 9.0% and higher than previous month at 8.9%. Still CNY Retail Sales were slightly weaker than expected offsetting some of risk-on that CPI and Industrial Production created. We could expect risk sentiment to drive US dollar index lower, however looking at technical levels the index approached key support at 80.50 and that does not offer much space for further bearish development.

Elsewhere, the euro against the greenback surged yesterday late in the evening to more than 1 ½ month high, we are focusing on this pair as prices have reached a key resistance at 1.3414. We consider that level key cap on upside bias as it is the upper boundary of the 1.3414/1.2758 wide range, thus in our view prices would at least make a correction. The British pound versus the US dollar continued its rising trend lifting to fresh monthly high but again key resistance at 1.56 is expected to contain positive momentum.