Dollar's recovery extends further in early US session trading above 84 level. As we've pointed before, the greenback has just got some support from an important medium term trend line. Current development indicates that dollar is gathering some momentum for a sizeable rebound at least and we would see the up trend finally resume after more than a monthof correction. Meanwhile, the Japanese yen rebounds stronger today and reversed earlier loss triggered by news of DPJ's defeat in upper house election. Crude oil and gold are mildly down. Nobel price winning economist Robert Mundell said that the Greece is facing 40% odds of having to restructure their public debt. Chances for Spain, Portugal and Ireland are at 20% while that for Italy is at 10%. Neveretheless, Mundell said that most of the bad news about Europe are know and Euro-dollar rate is in "more stable permanent territory" now. Defeat of Democratic Party in the upper house election triggers speculation that more easing efforts will be done by BoJ to bring the country out of deflation. According to results complied by NHK, the ruling Democratic Party of Japan won 44 seats, failing to meet the goal of 54 seats, while Liberal Democratic Party won 51. The result may push DPJ to be more serious in putting up pressure to BoJ to fight deflation and boost economic recovery. On the data front, Japan domestic corporate goods price index rose 0.4% mom, 0.5% yoy in June. UK Q1 GDP was finalized at 0.3% qoq, -0.2% yoy. Current account deficit widened to GBP -9.6B in Q1. Indec of services rose 0.6% 3m/3m in April. Dollar index's recovery from 83.62 extends further today. Focus remains on 84.82 minor resitance. Break will aruge that whole correction from 88.70 has finished after hitting medium term rising trend line (74.19, 80.04, now at 83.81). Intraday bias should then be flipped back to the upside. Further break of 86.42 will confirm the bullish case and target a retest on 88.70 high. The fall from 1.2721 extends further today and intraday bias is cautiously on the downside for the moment. As discussed before, , rebound from 1.1875 is expected to be limited by medium term falling trend line (now at 1.2716) and bring down trend resumption. Below 1.2479 minor support will indicate that such recovery is finished and bring deeper fall to 1.2149 support first. Break will confirm this bearish case and target another low below 1.1875. Nevertheless, note that sustained trading above the trend line (now at 1.2716) will invalidate our view and bring stronger rally towards 1.3266 resistance instead. In the bigger picture, fall from 1.5143 is part of the whole down trend from 2008 high of 1.6039. Such decline is expected to develop into a five wave sequence and target 100% projection of 1.6039 to 1.2329 from 1.5143 at 1.1433. We'd expect the current rebound from 1.1875, which is viewed as the fourth wave inside the five wave sequence from 1.5143, to be limited by trend line resistance (now at 1.2716) and bring one more fall. Break of 1.1875 will target next key support level at 1.1639. Nevertheless, sustained trading above the trend line will be the first alert that EUR/USD has bottomed earlier than we thought and will turn focus to 1.3266/3691 resistance zone.

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