Risk appetite trades regain momentum today as support from strong corporate earnings. European stocks are broadly higher as boosted by strong earnings from UBS AG and Deutsche Bank AG while US stock also set to open higher as DuPont Co. top second-quarter profit and revenue forecasts. Sterling is additionally supported by strong CBI distributive trade survey which indicates that sales on high street increased in July at the fastest pace since April 2007. GBP/USD takes out 1.5521 resistance to confirm medium term reversal. Meanwhile, Australian dollar and Canadian dollar are both strong against dollar too. Japanese yen is also sharply lower against major currencies. EUR/JPY has taken out 113.4 resistance while GBP/JPY also breaks 136 level. The developments suggest that more upside would be seen in yen crosses in general in near term. Nevertheless, beware of consumer confidence data in US for volatility.

Data released today saw US S&P Case Shiller 20 cities house price rose more than expected by 4.6% yoy in May. UK CBI distributive trades survey rose sharply to 33 in July versus expectation of 3. Eurozone M3 money supply growth turned positive to 0.2% yoy in June. Japan corporate services price dropped -1.% yoy in June versus expectation of -0.9% yoy. Australian conference board leading indicator rose 0.3% in May. German Gfk consumer sentiment rose more than expected to 3.9 in August. Swiss UBS consumption indicator rose to 1.81 in June.

NZD/JPY rises strongly following other yen crosses. Current rise from 59.54 is treated as the third leg of the correction from 58.64 and should extend to 65.28 resistance and above. Nevertheless, we'd expect upside to be limited well below 69.32 high to conclude the consolidation and finally bring another medium term fall.

GBP/JPY Mid-Day Outlook

Daily Pivots: (S1) 134.10; (P) 134.84; (R1) 135.29; More

GBP/JPY rises sharply to as high as 136.43 so far in early US session. The break of 136.39 resistance confirms that whole rise from 126.73 has resumed and should now target 61.8% retracement of 145.94 to 126.73 at 138.60 and above. On the downside, touching of 134.37 minor support will turn intraday bias neutral first. But another rise would remain in favor as long as 130.02 support holds.

In the bigger picture, with 145.94 resistance intact, we'd still favor that fall from 163.05 is not finished and would resume for a retest of 118.18 low. Break there will confirm that whole down trend from 2007 high of 251.09 has resumed for 61.8% projection of 215.87 to 118.81 from 163.05 at 103.06 next, which is close to 100 psychological level. However, break of 145.94 will indicate that fall from 163.05 is finished. Also, this will suggest that such fall is merely the second wave of the whole consolidation pattern from 118.81 and will bring another rise to 163.05 and above before resuming the longer term down trend.