Yen and, to a lesser extent, dollar rise sharply today riding another round of risk aversion trades in the markets. Asia stocks followed yesterday's decline in US and fell broadly today while European stocks are also generally lower. Indeed MSCI world index dropped for fifth consecutive days and reaches the lower level since mid May. The case for reversals in global equities continue to build up as DOW finally closed below head and shoulder top neckline support yesterday and opens up the case for deep fall to 7389/7673 region at least. Crude oil is also moving away from mentioned double top neckline support and dipped to as low as 62.03 so far today.

The technical development in Japanese yen this week is significant as EUR/JPY, GBP/JPY, AUD/JPY and CAD/JPY are all sustaining below medium term trend line support now. Yen should have bottomed out in medium term in June. More importantly, as noted in various occasions we treat this year's rebound in yen crosses as corrections to the larger scale down trend since the beginning of the financial crisis. Such correction has likely completed and we're seeing the longer term down trend in yen crosses resuming now. Hence, we'd expect yen's strength to persist for some time for the rest of the year.

The development in dollar is less clear in a way dragged down by weakness in USD/JPY. While the greenback does rebounds against other major currencies, the strength is not as apparent as yen so far. Dollar index is so far still limited below June's high of 81.47 and thus there is no confirmation of resumption of rally yet. The development in USD/JPY is also tricky as the pair is now sitting in important support zone above 93.84. As long as this support holds, we're still favoring the case that recent price actions from 99.67 in USD/JPY are unfolding as triangle consolidation. That is downside of USD/JPY should be contained by 93.84 support and bring strong rally. In such case, comparative strength will be back to dollar while should then send it sharply higher against other major currencies. However, break of 93.55/84 support will invalidates this case and in turn indicates that USD/JPY is also following other yen crosses lower in medium term. In such case, dollar index will likely continue to range bound for a while before resuming rally, same as against most major currencies. Hence, development in USD/JPY will be crucial to the near term fate of dollar against other majors.

On the data front, UK Nationwide consumer confidence improved from 54 to 58 in Jun, BRC shop price index showed 0.7% gain in Jun. Japanese current account surplus widened less then expected to 1.016T Yen in May but machine orders unexpectedly fell -3.0% mom. Australia Westpac consumer confidence deteriorated from 12.7% to 9.3% in Jul. Swiss unemployment rate climbed further from 3.5% to 3.8% in Jun versus consensus of 3.6%.