en
  • English
Login Open an Account

Trade Trade virtual

Knowledge Center

Assets Information

USD/JPY Live Exchange Rate

How To Trade The USD-JPY (Dollar to Yen) Currency Pair – A Complete Guide

 

When people think about trading in currency pairs, the first one that springs to mind is the EUR/USD pair. It’s understandable, as that is one of the most popular and heavily traded foreign exchange pairings at the moment.

 

However, there are other interesting and volatile currency pairs out there too. The US dollar and Japanese Yen (USD/JPY) pairing is the second most commonly traded by volume, with the GBP/USD pairing coming in a close third.

 

USD/JPY – Two Strong Global Currencies

 

The Japanese yen has been instrumental in helping the Asian markets and economy to grow in recent times, being used in several countries as a substitute for more volatile currencies. This has contributed greatly to the strength of the currency.

 

The USD has always been strong as it is widely used in the United States, one of the biggest economies in the world, and other countries. In fact, the USD is the most widely used currency in the world. 

 

At the time of writing, the war in Ukraine and rising inflation around the globe have caused the yen to drop by 11% to a 24-year low. Due to the increased volatility, traders are studying the price movements of the USD-JPY pair closely for possible trading opportunities that will enhance their trading portfolio 

 

The Japanese Yen is still the leading reserve currency in the Asian markets. Traders still view its high liquidity as a benefit since they are looking to capitalize on market movements in these countries.

 

The USD is still holding steady despite recent events and economic turbulence. Therefore, it is believed that investors are tending towards the safe haven of the USD/JPY.

 

Reasons To Trade The USD-JPY Currency Pair 

Experts have been carrying out USD/JPY technical analysis for many years now to determine if the pair can be added in a successful long-term strategy. 

 

The currency pair has high daily liquidity, which creates a high number of trading opportunities. The USD-JPY is closely related to the Japanese market, which is volatile in nature at the moment, with large fluctuations over the short term.

 

Traders hope to make a profit by applying trading strategies that take advantage of the volatile nature of the USD-JPY trading pair by accepting the risk involved in possible losses.

Market Events That Trigger USD-JPY Turbulence

The volatile nature of the currency pair is usually caused by economic factors and global events. 

 

  • Economic factors – The Bank of Japan sets the interest rates for the yen, which plays a major role in how well the Japanese yen performs in the currency exchange markets. If for example, interest rates rise, it is expected to negatively affect the USD-JPY currency pair, as well as limit liquidity in the process. 
  • Global events – Political and trade situations in other countries can affect the USD/JPY market. As mentioned earlier, the Japanese Yen is used in a variety of countries throughout Asia. The currency is also heavily traded in big economies such as China, so global events will affect trading. The United States Dollar is very strong and isn’t as highly influenced by global events, so it is generally expected to hold its value against the yen. 

How To Trade USD-JPY 

The most common way to trade the USD-JPY currency pair is to use a foreign exchange or forex provider. 

 

Once you have signed up for a forex account at a trading platform such as TradeEU, you can begin trading USD/JPY forex. 

 

A Contract for Difference (CFD) is the most popular way to trade in foreign currencies such as the Japanese yen and the US dollar. A CFD is a financial contract that enables you to trade currencies without ever taking ownership of any currency asset.

 

A CFD allows the trader and broker to exchange the difference between the initial price and the settlement price that occurs between the opening and closing of the contract. In other words, you make a short-term trade that speculates on the direction of the market price. 

 

For instance, if you expect that the US dollar will appreciate, you can take a long position on the USD/JPY market and buy. Alternatively, if you expect that the USD will depreciate against the JPY, you can take a short position and sell. 

 

By signing up at TradeEU, you’ll have access to a wide range of tools that will enable you to trade CFDs on USD-JPY faster and more efficiently. With informed trading analysis tools, TradeEU allows traders to gain valuable insights and develop market strategies that will help them with their trading journey. 

 

USD-JPY Trading Strategies

There are three main strategies that traders use for the USD-JPY currency pairing.

 

  • Price movement trading strategy – Traders predict whether the USD/JPY pair will follow an upward (bullish) or downward (bearish) trend over a certain period. If they predict a bullish trend they can buy. Conversely, if they predict a bearish trend, then they can sell. 
  • Economic data-informed trading strategy – Traders look at economic data and factors such as GDP, retail market performance, unemployment rates, and other economic events. After analyzing the data, they decide whether to buy or sell USD-JPY.
  • 1-hour trading strategy (scalping) – A short-term trading approach involves hourly trading on the currency exchange price movements. 

 

What Is The Best Time To Trade USD-JPY? 

Although forex trading markets are open 24 hours a day, some time slots are better than others for trading, particularly when the markets are at their most volatile.

 

The peak time for trading in the USD/JPY market is between 12:00 and 15:00 GMT, as this is when most traders are active and price movements are larger. 

 

The worst time to trade is when the Japanese markets are drawing to a close for the day, which is between 03:00 and 05:00 GMT, and the other major global markets such as New York and London are yet to open.

 

Another time to avoid is between 21:00 and 24:00 GMT as the NY exchange is closed and Tokyo is yet to open, making it another quiet time.

 

Frequently Asked Questions 

Now that you have a general overview of the USD-JPY trading pair, we have put together some frequently asked questions to clear up any misconceptions.

 

Where can I trade USD for JPY?

You can trade USD JPY on any forex platform. Ideally, you should look for a platform that offers CFDs and is secure and reliable. You can start trading USD-JPY on TradeEU today. We have a wide array of tools and resources on our website to help you out. 

 

How do I trade forex USD to JPY?

One of the most popular trading strategies is taking an overview of the market direction to make decisions. This can also be called “going long/going short”.

 

CFDs offer great opportunities to traders looking to utilize forex trading on the USD/JPY market. CFDs allow any level of trader to take advantage of the price movement of foreign exchange markets without owning the currencies.

 

When can you trade in USD/JPY?

There is no specific time you can trade. Trading can be done at any time of the day or night.

 

However, to make the most of the USD/JPY currency pairing volatility, it’s best to choose a time when the markets are active in both Japan and the USA. In other words, the best time period is when both Tokyo and New York are actively trading at their highest level. That time is from 12:00 to 15:00 GMT.

 

What time is USD/JPY most volatile?

Since a lot of trading activities are done at the most active hours from 12:00 to 15:00 GMT. This means the pair tends to be more turbulent during these hours, making it the ideal time for currency trading. 

 

Why is USD/JPY so popular?

The United States Dollar is the strongest currency in the world. It is traded worldwide in multiple markets. The Japanese Yen is the most traded currency in Japan and most countries in Asia. The pairing of these two strong currencies presents good opportunities for investors and traders who are looking to expand their portfolios.

 

SOURCES:

 

https://admiralmarkets.com/instrument/us-dollar-vs-japanese-yen-usdjpy 

 

https://capital.com/trade-usdjpy 


https://www.investopedia.com/terms/forex/u/usd-jpy-us-dollar-japanese-yen-currency-pair.asp

 

https://www.fxforex.com/markets/usd-jpy 

Questions & Answers

Do trades have to stay open for a fixed amount of time?

You have full control over closing the trades. You can keep them open as long as you want. Same goes for closing them.

Glossary

FX

An abbreviation commonly used to refer to the trading of foreign currency.