Financial markets are rocked by another wave of selling in the China stock market which saw Shanghai A stocks dropping more than 5% today. Commodities are sent lower with crude oil dropping further to as low as 66.35 so far. Massive buying of Japanese yen is seen, which takes most yen crosses through near term support level to confirm decline resumptions. AUD and NZD are hardiest hit with AUD/JPY dropping over -1.8% and AUD/USD dropping -1.4% so far. Dollar is helped by strength in yen and rebounds further against most major currencies. As note in our weekly report, there is possibly a developing trend that funds are starting to flow back from emerging markets and commodities into safer assets. The development in the next week or two will likely clear out the picture.

Japanese data released overnight showed impressive rebound of 0.9% qoq and 3.7% annualized in Q2. Nevertheless, the data missed expectation of 1.0% qoq, 3.9% annualized growth. GDP deflator also rose less than expected by 0.5% yoy only. Looking ahead, Eurozone Trade balance, US empire state manufacturing index, TIC capital flow and NAHB housing market index will be featured.

Dollar index's rebound extended further to as high as 79.14 so far today. As discussed before, pull back from 79.39 should have completed at 78.23 already, ahead above 78.14 support as expected. Intraday bias remains on the upside as long as 78.71 minor support holds and further rally should be seen. Break of 79.66 resistance will solidify the bullish case that fall from March's high of 89.69 has completed with five waves down to 77.43 already and will set the stage for stronger rise to 81.47 resistance for confirmation.