What you need to know about the USD JPY currency pair

The Japanese yen is one of the most coveted currencies in Asia and the USD JPY is one of the major currency pairs as it is an active market with high amounts of daily trading volume. Even though it may not be the most volatile pair in the market, it still affords exciting profit potential with its intraday movements.

What you need to know about the USD JPY currency pair

This USD JPY pair is among the most popular currency pairs in the market, because it combines the currencies of two powerful economies. Fundamental traders are particularly active in USD JPY due to its strong correlation with the stock and commodity markets.

 

Trading hours for USD JPY

While the forex market may be open for trading around the clock, not all currencies actively traded throughout this period. If you are interested in trading a major currency, it’s almost always recommended that you try to monitor the market during the local trading hours.

When local investors are active, the currency is more heavily traded which ignites more competitive pricing and larger price movements. The Tokyo session opens at 11 PM and closes at 7 AM (GMT), but interestingly the highest activity in this pair is actually during the hours when the New York and London sessions coincide – between 12 PM and 3 PM.

 

What to watch out for

Considering how easily global trade affects this currency pair, it’s fair to say that any important financial or political event may have an impact on its performance as well.

Historically, Japan’s economy has been highly dependent on imports and exports and therefore commodity prices are a key indicator in the direction of the JPY. Rising commodity prices may cause the Japanese economy to stutter and make outside investment less enticing. 

Another important indicator, however, is the Central Bank of Japan and its constant changes in monetary policy in hopes to boost the economy.

If you are interest in including the currency pair in your daily trading portfolio, you need to keep an eye on any economic releases and announcements from Japan and its Central Bank as well as the U.S stock market.

 

USD JPY Behavior

The general consensus around this currency pair is that it tends to move in a tight range before breaking out in which case it will start to trend in a new direction. Forex traders prefer to open pending orders with this pair as they found that they are more effective than an instant order with attached stop loss and take profit limits.

Using support and resistance levels, traders can gauge the most favorable times to make their entry into the market and make any upward or downward movement work in their favor.

 

When to avoid trading USD JPY

It’s important to highlight that the there are noticeable drops in volatility outside the trading hours mentioned above and that normally, you would want to avoid trading this market unless you can trade during this time.

When market liquidity isn’t deep enough and the price of a security remains idle for long periods of time, its undoubtedly pointless to try trading as price fluctuations won’t be big enough to cover the spreads or other overnight trading costs you may need to pay for holding open a position. 

 

Interested in trading USD JPY with an award-winning and regulated forex broker? Register a free account today and make your first deposit to get started!

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