Stocks in China resumes recent sharp fall today by falling over -5% to make a new low and drags down Asian equities and commodities. European indices also open broadly lower. Gold is sent back below 940 level while crude oil is back below 70 level. Dollar and yen, and to a lesser extend swiss franc, are logically boosted up on safe haven flow. It's possible that this week's rally in dollar and yen is resuming and focus in the following sessions will turn to this week's highs against major currencies for confirmation. One thing to note is USD/JPY's vulnerability to 94 support level and it's looking more likely that yen will start to outperform the dollar in next round of risk aversion trades.
BoE MPC minutes is the main focus in European session today. Markets will look into the reasons for the unexpected expansion of quantitative easing campaign by 50b GBP in last meeting, as well as as discussions on further expansion. Sterling rebounded strongly yesterday on the back of stronger than expected CPI readings in July and today's minutes will be an important factor in determining whether the pound can extend such rebound.
Elsewhere, Japan all industry index rose less than expected by 0.1% mom in June. German PPI dropped more than expected by -1.5% mom, -7.8% yoy in July. Eurozone Current account deficit is expected to widen to EUR -1.7b in June. UK CPI industrial trends orders is expected to improve from -59 to -50 in August. Canadian CPI is expected to drop -0.2% mom, -0.8% yoy in July.
Dollar index recovers strongly after drawing support from 4 hours 55 EMA. While another fall cannot be ruled out for the moment, downside is expected to contained above 78.23 support and bring rally resumption. As discussed before, above 79.51 will target 100% projection of 77.43 to 79.39 from 78.23 at 80.19 next. Current development is so far inline with the view that fall from March's high of 89.69 has completed with five waves down to 77.43 already. 81.47 will be the key resistance level for confirmation after taking out 79.66.