JPY will likely hit another record high in the Q1 of 2012. Especially during March, due to its financial year closure in April. Additional pressures that are pushing JPY higher is also due to the inherent risk of the current instability of the Eurozone and US. Sentiments throught the Tankan report has shown that Japan business confidence has also been a record low and wants BOJ to play a more active role in stabilizing the strong JPY which have hurt export to a critical point.
JPY and AUD has always been the central attraction of carry trade. With the strengthening of the USD and weakening of EUR, we are likely to see more unwinding of USD carry trade during March repatriation of earnings from Japanese MNCs back to Japan. With US facing their own set of debt problems, they will most likely be adopting some form of QE which will likely to drive USD/JPY to breach its key support level at $76. I am forecasting USD/JPY to hit a record high of $70. and EUR/JPY at $95 with key support level at $100.
However, word of cautious is that BOJ has commited to intervene at all cost to keep JPY stablized. I believe, BOJ will take certain strategic measures during Feb-Mar to ensure the stability of its currency.
Meanwhile, It will be interesting to see if the January Effect still stands after the Dodd-Frank Act.
