USD/JPY opened the session on its highs around 97.00 but early profit taking from Japanese accounts followed by excellent factory output figures out of Japan, sent the JPY higher across the board after the big losses from yesterday. USD/JPY and GBP/JPY were the pairs that came in for the harshest treatment and there has been very little bounce in either so far today. Trailing stop losses in EUR/GBP have also been to blame for the weakness in the pound. Insipid data on private sector credit in Australia saw the AUD lose ground against the EUR and of course the JPY whilst only making small gains against the increasingly friendless USD.

There have been some increasingly large flows in the market in recent weeks and traders are trying to guess where the next ones are coming from. Real money buying of AUD and EUR has been replaced by Sovereign buying although they are mostly content to sit back and buy dips rather than chase the market. Some Sovereign selling of cable has also been noted over the last 48 hours, simply a bit of profit taking most think. Traders are also increasingly on the look out for hedge funds covering proxy positions in the JPY crosses which could lead to further big gains.

Orders: Possible short term knock-out at 1.40 in EUR/USD, unconfirmed; heavy selling in AUD/USD from .7925/.80; trailing stops in EUR/GBP above .8790 and again above .8815; BIS/SNB expected around 1.5050 in EUR/CHF.

Markets: Nikkei- flat; Sydney +1.2%, Kospi -0.6%, Shanghai +0.25%, HK +0.8% .Gold and Oil steady at $963/oz and $64/bbl respectively.

Ranges: EUR/USD 1.3925/99; Cable 1.5918/78; USD/JPY 96.25/97.02; EUR/JPY 134.44/135.20; GBP/JPY 153.45/154.65; AUD/USD .7830/88.