Let’s hope that there is some activity at the Tokyo fix. As we near the end of the Japanese financial year, the fixing turnover should start increasing. Generally this should involve JPY buying, but that is not always the case.

As JR rightly points out, the increased war-chest for intervention that the Japanese government announced last week might well be a game changer. Certainly we saw some serious short-covering in AUD/JPY and GBP/JPY in particular and the fact that USD/JPY was able to chew easily through fairly heavy selling between 89.50/90.25 is certainly a bullish sign. After being bearish last week, I’m certainly not suddenly turning bullish but I am going to sit on the sidelines until a clear trade emerges in either USD/JPY or the JPY crosses.

Talk of some more good selling interest at 90.60/70 in USD/JPY.

The low so far has been 88.48 as the USD tries to fall against the JPY as well as all the other majors (being still led by the GBP). I think this USD-selling might change into JPY-cross buying before the session is out.

Typical market shenanigans where dealers mark the market higher into the fix, then fill the demand at the higher level, and then the market slips back afterwards.

The JPY crosses are under heavy pressure in the wake of the 16:00 GMT fixing. USD/JPY was sold heavily at the fix and GBP/JPY sure looks like a victim as well.

88.55 is crucial support for USD/JPY amid chatter of a barrier option at the 88.50 level. We trade now at 88.87. Cable trades at session lows of 1.5235 with GBP/JPY at 135.40.

We have both risk aversion and USD weakness playing out at the moment it appears as EUR/USD holds in the 1.3560s (”weakness” being a relative term) but the AUD/USD and pound both under a bit of selling pressure.  Reflation trades have been dealt a set-back by the very soft US housing data, which when couples with yesterday’s drop in consumer sentiment, has traders concerned the US recovery is sputtering.

Keep an eye on the short-end of the US yield curve for further JPY clues. A break below recent 0.85/0.86% rates in 2-year notes will likely translate into more JPY strength.

AUD/JPY trades at 80.00, while GBP/JPY trades at 138.60.

The Nikkei has continued to slide albeit slowly and the Hang Seng is expected to open down by 0.8%. The JPY crosses are giving up some of their earlier gains but the going is still very slow.

The news that the IMF will sell their remaining gold reserves has sent the spot price lower again this morning, currently trading at $1100.50, down $6 from the NY close. The JPY crosses and the major pairings continue to trade with a heavy feel.

Much stronger than expected machinery orders out of Japan, but as usual traders don’t know whether to buy or sell JPY in a market which always ignores Japanese fundamentals! Slightly pro-growth and therefore pro-risk I’d suggest.

With the profit taking now out of the way for most of the JPY crosses, the negative sentiment has returned and the JPY crosses have recommenced their falls, led by EUR/JPY. This cross has fallen 70 pips from a session high at 123.20. More volatility inside a wide 120/124.50 range can be expected.

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