EUR/JPY surges in an otherwise mixed market today. While the greenback rebounded strongly in late session yesterday, the strength there was not enough to push dollar through near term resistance against most major currencies, except yen. Instead the greenback's rally stalled after san Francisco Fed Yellen said that interest rates in US interest rate may stay near zero for the next few years and that's not outside the realm of possibility. Clearer trend is seen in broad based weakness in Yen after data from China Manufacturing PMI showed expansion for the fourth consecutive months. Some additional pressure was seen on yen by disappointing quarterly tankan survey. Euro, on the other hand, is lifted by stronger than expected retail sales data from Germany. Much volatility is anticipated with manufacturing data across atlantic to be released, as well as job reports from US.

Japan's quarterly Tankan survey showed improved, but lower than expected, sentiment in large corporations while small firms continued to struggle in June. The brightest spots were the decline in 'inventory level for finished goods and merchandise' and improvement in financial position of large corporate. Large manufacturer business condition DI rose to -48, worse than consensus of -43, from -58 in March while the reading for large non-manufacturer improved modestly to -29, compared with market expectation of -26 and -31 in March. For smaller companies, manufacturing and non-manufacturing DIs came in at -57 (consensus: -49, March -57) and -44(consensus: -40, March -42), respectively, signaling domestic demand remained bleak. More details in BOJ's Quarterly Tankan Survey: Improvement Seen but Failed to Alleviate Recession Worries

Australia retail sales doubled forecasts by rising 1.0% mom in May but there were little reactions to the data. RBA Commodity Index dropped -29.3% yoy in Jun.

Germany retail sales unexpected rose 0.4% mom in May but on yoy basis, the data dropped more than expected by -2.9%. finalized PMI manufacturing from Germany and Eurozone will be released and are expected to be unrevised at 40.5 and 42.4 respectively.

One of the main focus in European session is on UK PMI manufacturing which is expected to improve from 45.4 to 46. Sterling had a sharp reversal yesterday, with outside day bar against dollar and yen, which threatens recent up trend in the pound. The PMI data today will be critical to determine whether the tide in Sterling has reversed already. Keep an eye on 1.6232 in GBP/USD and 0.8603 in EUR/GBP.

It will also be a busy day in the US. In particular, markets will pay much attention to ADP employment change, challenger job cuts as well as ISM employment components for hints on tomorrow's non-farm payroll release. In addition, focus will also be on whether ISM manufacturing index could continue recent improvements.

Looking at the dollar index, the break of 80.29 minor resistance suggests that a temporary low is at least formed at 79.44 and further rise might be seen to retest 81.36/47 resistance zone first. There is no change in the view that that recent price actions of dollar index form 81.47 are consolidative in nature. That is, rise from 78.33 has not completed yet. Though, some more choppy consolidations are still possible before an upside breakout to next key cluster resistance at 82.63. (38.2% retracement of 89.62 to 78.93 at 82.64).