Major currencies recover against dollar and yen as markets stabilize following yesterday's late recovery in US stocks. Asian equities are mildly higher but lack clear momentum in the rebound yet. With some intraday levels taken out in dollar and yen crosses, some consolidation will likely be seen in near term. While reversal in crude oil is clear, the head and shoulder tops in DOW and S&P 500 are not confirmed by a close below neckline support yet. But after all, we'd expect risk aversion to continue to build up on summer doldrums and hence, more upside is favored in dollar and yen in general.

One thing to note for this week's market is that Sterling's weakness is additionally fueled by speculations that BoE might expand the quantitative easing program on Thursday. While some economists expect BoE to stick with the current plan of GBP 125b asset purchase, there are speculations that BoE might raise the plan to up to GBP 200b eventually because recovery from recession is not guaranteed. The bank may continue that by adding another GBP 25b this week.

Aussie is another currency that's under most pressure this week, in particular against yen and Kiwi. RBA left rates unchanged at 3.00% today as widely expected. The statement said that global economy is stabilizing and downside risks have diminished. Economy in Australian is not as weak as expected a few months ago. Nevertheless, the outlook for inflation allows some scope for further easing, if needed. And how the scope might be used will depends on how economic and financial conditions unfold and how they impinge on prospects for a sustainable recovery in economic activity.

Main focus today will be on economic data from Europe. UK Industrial production and manufacturing production will be released and are expected to show mild recovery of 0.2% mom in May. Germany Factory orders are expected to show 0.5% rise in May. Canadian building permits is expected to rise 0.8% mom in May while Ivey PMI is expected to rise back to above 50 at 50.3 in Jun.

Looking at the dollar index, despite rising to 80.89 yesterday, there is a lack of follow through buying to send the index through 81.36/47 resistance zone. With 4 hours MACD dragged below signal line, an intraday top is likely in place and it looks like some more consolidation would be seen before the long awaited break out. Nevertheless, even in case of another fall, we'd still expect downside to be contained above 79.19 support and bring an upside breakout to 82.63 cluster resistance (38.2% retracement of 89.62 to 78.93 at 82.64) eventually.