Dollar and yen pulled back sharply overnight following sharp rebound in commodities and subsequent energy led stocks rebound. Both currencies are still soft today on follow through rebound in Asian stock markets. However, note that key near term levels in dollar and yen pairs are still holding in general and there is no structure change in the bullish near term trend yet. Both currencies should be staging for a rebound at current level if recent rise is going to resume. Among the major pairs and crosses, AUD/JPY and NZD/JPY are still the weakest so far this week and will probably lead the way in case of another round of risk aversion trades. Main focus in the European session today will be on UK retail sales which is expected to rise 0.4% mom, 2.8% yoy in July. M4 money supply is expected to rise slightly by 0.2% mom in July with yoy rate down to 13.3%. Swiss trade surplus rose more than expected to 2.35b in July. ZEW expectation from Swiss will also be released. In US session, initial jobless claims is expected to remain at 550k level. Leading indicators is expected to rise 0.6% in July. Philly Fed index is expected to show improvement to -2 in August. Canadian wholesale sales is expected to drop -0.1% mom in JUne. Looking at the CRB commodity index, while yesterday's rebound was strong, there is no change in the near term outlook. Rise from 231 should have completed at 269.18 as suggested with daily MACD staying below signal line. Another fall should be seen, at least with an attempt to test rising trend line support at 241.1. Hence, the current rebound should be brief and another fall is expected after some sideway trading. In such case, the greenback will be lifted by another fall in commodities.

Looking at the dollar index, while the fall from 79.51 was deep, it's still holding above 78.23 cluster support (61.8% retracement of 77.43 to 79.51). There is no change in the near term bullish view that rise from 77.43 is still in progress. Above 78.82 will flip intraday bias back to the upside and break of 79.51 will confirm rally resumption. Also, note that break of 79.66 resistance will have the index sustaining above medium term falling channel and in turn will solidify the case that whole fall from March's high of 89.62 has finished at 77.43 already. Focus will then be shifted to 81.47 resistance for confirmation. However, note that sustained break of 78.23 support will seriously dampen this view and open up the case that down trend from 89.62 is still in progress for another low below 77.43 before completion.