The leveraged community took a beating overnight on its JPY cross positions. Those looking to squeeze an extra one percent or so of carry out of positions had crossed things like Norway and South African rand against JPY and got it around the neck in a big way when risk aversion swept across the markets, sending USD/JPY briefly below 85.00. Fears have calmed some and USD/JPY and the JPY crosses have bounced back.

87.11, the old area of support, is now key resistance on rebounds. Look for short covering to accelerate if that level is retaken. We trade now at 86.62.

UPDATE: Japan’s strategy minister (didn’t know such a thing existed) says the BOJ and the government will deal with the JPY together. The BOJ knows that Japan is in a deflation and knows the steps for dealing with it, the minister says.