JPY is mixed in early European trade, with the churn in the risk profile driving price action. JPY traders are focused on developments with Lehman Brothers and KDB after the potential for a Lehman failure increased on Tuesday. KDB and Lehman ended talks without reaching an agreement, which weighed heavily on the stock and saw a widening in CDS. A S.Korean government official said today that the two parties were no closer to a deal, which fueled modest JPY demand, leaving EURJPY below 152.00 and USDJPY around 107.20. However, USDJPY and the JPY crosses in general are off their overnight lows on bargain hunting and short covering activity. EURJPY bounced out of 150.50 amid option barrier talk at this level and USDJPY found support ahead of the critical 106.50 level. This is the 200-day moving average and Ichimoku cloud support, which encouraged large European interest for a 106.50 USD put/JPY call in the overnight contract.