Japanese yen surges across the board as the week starts as risk aversion is back to be the theme of the markets. Aussie, Kiwi and Sterling are hardest hit in yen crosses which also dragged them lower against dollar. While Euro also weakens sharply against yen, it remain steady against the green back so far even though EUR/USD looks vulnerable. Nikkei dropped over -1.3% or -135 pts today while European indices are set to open lower. Crude oil dives through 65 level which further confirms the double top reversal pattern.

ECB Trichet said that he's concerned of the lack of coordination of economic policy around the world. Trichet said that if we return to a picture of internal and external deficits that led to this crisis, we'll have the recipe for a new crisis. He's optimistic on convergence on regulations and elimination of pro-cyclical policies, but he's skeptical on coordination.

Technically speaking, as mentioned before, CAD/JPY took the lead and sustained below medium term trend line support. EUR/JPY and AUD/JPY are now trying to get rid of the equivalent trend line to confirm reversal. GBP/JPY is closely following. Against dollar, most significant development so far is GBP/USD's break of 1.6232 support today, which strongly suggest that last week's high of 1.6742 is a medium term top.

On the data front, main focus today will be on US ISM non-manufacturing index. The headline reading is expected to have risen for the third consecutive month to 46 in June as driven by new orders and business activity components. Last week, manufacturing index increased to 44.8 in June from 42.8 in the previous month. We believe similar up trend will be seen in service sectors as recent data have shown improvement. For instance, retail sales stabilized while consumer confidence also improved over the past few months.