The EUR/JPY pair has had a very bumpy last couple of months, and I don’t know that is going to change anytime soon. However, I think that a rally could come just if nothing else but to give the market an opportunity to try to build up enough momentum to continue going lower. I think that the 120 level below is a massive floor in this market, so at this point in time I think that we may need to back up again and again in order to finally chip away at that massive amount of support.
Keep in mind that this pair is highly sensitive to risk appetite, so in general the EUR/JPY pair tends to follow stock markets and commodities in general. The S&P 500 and the EUR/JPY tend to have a high correlation to each other over the longer term, but it must be said that they are at complete opposites at this point in time. That shows just how out of sync the old correlations are at the moment.
Any rally at this point in time is going to have a significant amount of resistance above, probably at the 125 level, and of course at the 128 level. There is so much in the way of noise above that I think you have to be looking for short-term rallies to sell the EUR/JPY pair again and again during the month of June. A break down below the 120 level would be massively negative, and at that point time it would be more of a “sell and hold” type of situation. I think that the market will continue to be very choppy overall, so no matter what you do it’s going to be difficult to hang onto a trade for any real length of time unless of course you get the aforementioned break down. In the meantime, I think it’s easier to sell short-term rallies.