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• Big manufacturers see USD/JPY averaging 84.20 for 2011/2012

I know there are a few contrarians like me out there looking for a possible 300 pip turnaround and I think AUD/JPY might be worth a look later on today.

I don’t think it’s worth the risk entering close to current levels but if AUD/USD breaks above the 1.0375 option level and if USD/JPY stalls near the 200-day MA, then AUD/JPY might be worth shorting. I’m guessing that the cross would be somewhere in low 87′s then, so selling with a stop above 88.00 and a target around 84.50 looks like a potentially good risk-reward trade. Just a thought.

Just to reiterate, in case you’re short, talk in the market now of plentiful stops building above 1.0380. Not sure why but somebody still obviously needs to buy.

Talk in the NY market was of more option barriers at 1.0375.

No sign of any slowing down in the bullish march and the pair is now above 86.00. The obvious technical target is at 88.00 but that’s a long way away yet.

On the order front:

• AUD/JPY: Decent sell orders noted starting at 87.15 through 87.50
• AUD/USD: Stops above 1.0380 and 1.0400. Sell orders dominate again around 1.0425. Not much on downside until corporate bids at 1.0200.

83.30 has been breached and stops triggered above 83.35. No follow through thus far. Corporates like to use big technical levels so I’m guessing that the next batch of sell orders will be near the 200-day MA at 83.63.

• If Irish economic growth is weak, it won’t be easy to repay debt
• If things go badly, Europe could grant deferrals and longer timeframe
• There would be consequences for relationship with Europe if Ireland imposed losses on senior bonds

The EUR/USD has slipped 15 pips lower on these comments.

This time around it was Narayana Kocherlakota , whose comments caught the market a bit by surprise and spurred a minor USD rally in late NY trade.

USD/JPY is opening in Asia directly below heavy sell orders at 83.25/30 but as Jamie mentioned, stops are said to be sitting directly above. Technical resistance is at the 200-day MA at 83.63.

I’ve read two reports suggesting that the big AUD buying flows are now drying up but it’s certainly not trading like they are. Pullbacks have been quite shallow, but as I said yesterday, this is probably more about AUD/JPY buying by hedge funds afraid of missing a boat.

Local dealers are happy to play from the short-side in the morning in expectation of some profit-taking and then wait and see what the Tokyo market does with the JPY crosses.

Corporate bids are firm near 1.0200 and there’s supposedly another barrier at 1.0375. Playing the edges of this range with a distinct bullish bias would seem like a sensible strategy.

Quite a bit of volatility overnight but not a whole lot of movement. The JPY crosses remain well bid, USD/JPY is stalling below heavy sell orders, the AUD/USD continues to make new highs and EUR/GBP has made another push higher. All of these moves are in line with recent trends and we can expect more of the same I’d suggest.

The Japanese Tankan index is released today but otherwise the economic calendar is relatively bare in Asia.

Good luck today, TGIF and beware of the April fool!

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