EUR/JPY fell rather hard during the Friday session as the Euro suffered against most currencies around the world. With the situation worsening in the Spain, and the bond markets looking weaker and weaker in the periphery, the Euro should continue to be sold on the whole.
As the Japanese yen is considered a safety currency, it makes sense of this pair continues to fall. One of the things that you have to keep in mind when trading this particular pair is that the Bank of Japan will not hesitate to manipulate the value of the Yen when needed. However, you need to know that the trigger pair for such interventions and manipulations is actually the US dollar against the Yen. It is because of this, you have to pay attention to the USD/JPY pair in order to trade the Japanese yen at all.
One eye on each chart
One of the trickiest things about trading the Japanese yen lately is that we are approaching levels against the US dollar that could trigger intervention. While the Bank of Japan typically doesn't intervene directly against other currencies, when they do littered being against the US dollar it causes similar reactions in other currency pairs, albeit temporarily. Because of this, we need to pay attention how the US dollar is holding up against the Japanese yen as a meltdown in that pair would certainly cause intervention. However, if it is an orderly decline, the threat of intervention declines drastically, and we can feel much safer shorting the Euro against the Yen.
The pair did reach new lows during the Friday session, and just as importantly close that the very lows of the day. This suggests to me that we will see further weakness, and I will be looking to either sell rallies, or fresh lows. The way this pair is been trading however, I don't know what kind of a rally we really will get. 96 should be resistive all the way up to 98 now. Because of this, I will have to make my entry based upon shorter time frame charts such as the four-hour or one hour time frames. I will not buy this pair under any circumstances.