With the EUR currently trendless, traders have been searching for trends elsewhere in recent weeks with JPY shorts the obvious play. The traditional carry trade has been AUD/JPY and the danger always exists that the market gets caught overly long and then we get a clean-out. This is exactly what happened yesterday in AUD/JPY with stop-losses getting triggered at regular intervals until Sovereign buying in both USD/JPY (82.00) and AUD/USD (1.0300) stopped the rot after a 2% fall. We can expect AUD/JPY to again be the lead pair but we may see some Toushin demand at the Tokyo fix so don’t get too bearish too early!
The big weekend event here in Asia will be the Chinese PMI released tomorrow and as usual there are plenty of rumours regarding both good and bad numbers; sounds like a good reason to reduce exposure over the weekend.
Good luck today and TGIF.