While dollar is generally staying in tight range, yen extends recent rebound together with falling treasury yield after release of US CPI report. Further strength is seen in the Japanese yen after release of disappointing consumer sentiment data. Stocks open mildly softer but is basically staying in tight range below this week's high. Crude oil also drops back to below 70 level on risk aversion.

US Headline CPI was flat mom in July but yoy rate dropped more than expected from -1.4% to -2.1%. Core CPI rose 0.1% mom, 1.5% yoy, also below expectation of 0.2% mom, 1.6% yoy. The data underscore Fed's view that inflation will remain subdued. Other data released from US saw industrial production rose 0.5% in July while capacity utilization rose to 68.5%, both above consensus expectation. Eurozone CPI was revised down to -0.7% mom, -0.7% yoy in July. Canadian manufacturing shipments rose 1.9% mom in June and motor vehicle sales dropped -0.6%.

Earlier today, Aussie was lifted to a new high against dollar by comments from RBA Governor Stevens. In his parliamentary testimony, Stevens said that at some point, the bank will have to make a response to move away from the current emergency setting of extraordinary measures. Stevens did not dismiss the idea that rates are going to be raised before the end of the year and normal rates are significantly higher than the current 3.0%. Nevertheless, the strength of Aussie was apparently limited by another day of decline in Shanghai stocks markets.

USD/JPY Mid-Day Outlook

Daily Pivots: (S1) 94.84; (P) 95.67; (R1) 96.29; More.

USD/JPY's fall extends further to as low as 94.59 in early US session and further fall might still be seen. Nevertheless, key level should lie in 94.03/05 (100% projection of 97.77 to 95.11 from 96.71 at 94.05 and 61.8% retracement of 91.73 to 97.77 at 94.03). As long as this level holds, we're still favoring the case that fall from 97.77 is merely a correction and rise from 97.13 is still in progress. Above 96.71 will flip intraday bias back to the upside for rally resumption to 98.87 resistance.

In the bigger picture, as mentioned before, fall from 101.43 should have completed at 91.73 already. The three wave corrective structure in turn indicates it's merely a correction to whole rally from 87.12. Indeed, rise from 91.73 is tentatively treated as resumption of such medium term rise. Sustained break of 101.43 resistance will confirm this case and target 100% projection of 87.12 to 101.43 from 91.73 at 106.04 next. On the downside, break of mentioned 94.03/05 cluster support will invalidate this view and suggest that whole fall from 101.43 is possibly still in progress for another low below 91.73 before completion.