Trading USD/JPY
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As a result of relatively low bid-ask spreads and enticing liquidity, trading the USD/JPY is a popular major currency pair. Also, its characteristics make it a tempting proposition for both beginners and experienced traders. This page will break down the history of the currency pair, as well its benefits and drawbacks. How to start day trading the USD/JPY in 2024 will then be covered, from charts and signals to strategy and trading hours.
USD/JPY Trading Brokers
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1FOREX.comActive Trader Program With A 15% Reduction In Costs
Ratings
$1000.01 Lots1:50NFA, CFTCForex, Stocks, Futures, Futures OptionsMT4, MT5, TradingView, eSignal, AutoChartist, TradingCentralWire Transfer, Credit Card, Debit Card, Visa, Mastercard, Skrill, Neteller, ACH TransferUSD, EUR, GBP, CAD, AUD, JPY, CHF, PLN -
2NinjaTrader
Ratings
$00.01 Lots1:50NFA, CFTCForex, Stocks, Options, Commodities, Futures, CryptoNinjaTrader Desktop, Web & Mobile, eSignalACH Transfer, Debit Card, Wire TransferUSD -
3OANDA USCFDs are not available to residents in the United States.
Ratings
$00.01 Lots1:50NFA, CFTCForex, Crypto with Paxos (Cryptocurrencies are offered through Paxos. Paxos is a separate legal entity from OANDA)OANDA Trade, MT4, TradingView, AutoChartistWire Transfer, Visa, Mastercard, Debit Card, ACH TransferUSD, EUR, GBP, CAD, AUD, JPY, CHF, HKD, SGD -
4IGForex trading involves risk. Losses can exceed deposits.
Ratings
$00.01 Lots1:30 (Retail), 1:250 (Pro)FCA, ASIC, NFA, CFTC, DFSA, BaFin, MAS, FSCA, FINMA, CONSOBCFDs, Forex, Stocks, Indices, Commodities, ETFs, Futures, Options, Crypto, Spread BettingWeb, ProRealTime, L2 Dealer, MT4, AutoChartist, TradingCentralPayPal, Wire Transfer, Mastercard, Credit Card, Visa, Debit CardUSD, EUR, GBP, CAD, AUD, JPY, ZAR, SEK, DKK, CHF, HKD, SGD -
5Interactive Brokers
Ratings
$0$1001:50FCA, SEC, FINRA, CFTC, CBI, CIRO, SFC, MAS, MNB, FINMAStocks, Options, Futures, Forex, Funds, Bonds, ETFs, Mutual Funds, CFDs, CryptocurrenciesTrader Workstation (TWS), IBKR Desktop, GlobalTrader, Mobile, Client Portal, AlgoTrader, OmniTrader, eSignal, TradingCentralCheque, ACH Transfer, Wire Transfer, Automated Customer Account Transfer Service, TransferWise, Debit CardUSD, EUR, GBP, CAD, AUD, INR, JPY, SEK, NOK, DKK, CHF, AED, HUF -
6Videforex20% to 200% Deposit Bonus
$250$0.011:500Binary Options, CFDs, Forex, Indices, Commodities, CryptoTradingViewSkrill, Perfect Money, Bitcoin Payments, Neteller, Credit Card, Visa, Mastercard, Ethereum PaymentsUSD, EUR, GBP, AUD, RUB -
7Plexytrade120% Cash Welcome Bonus
Ratings
$500.011:2000UnregulatedCFDs, Forex, Indices, Stocks, Commodities, CryptoMT4, MT5Bitcoin Payments, Ethereum PaymentsUSD, EUR -
8RedMars
Ratings
€2500.01 Lots1:30 (Retail), 1:500 (Pro)CySECCFDs, Forex, Stocks, Indices, Commodities, CryptosMT5Credit Card, Wire Transfer, Debit Card, Sticpay, FasaPay, Bitcoin Payments, Trustly, PayPal, Skrill, Neteller, Klarna, Mastercard, VisaUSD, EUR -
9DNA Markets
Ratings
$1000.01 Lots1:500ASICCFDs, Forex, Indices, Commodities, Stocks, CryptoMT4, MT5Credit Card, Debit Card, Wire Transfer, BPAY, Skrill, Neteller, Bitcoin Payments, Bitwallet, AstroPay, MastercardUSD, EUR, GBP, CAD, AUD, NZD, SGD -
10World Forex100% Deposit Bonus
$10.01 Lots1:1000SVGFSAForex, CFD Stocks, Metals, Energies, Cryptos, Digital ContractsMT4, MT5Wire Transfer, Debit Card, Credit Card, Visa, Mastercard, Google Wallet, Apple Pay, Perfect Money, Bitcoin Payments, VoletUSD, EUR, RUB
Here is a short summary of why we think each broker belongs in this top list:
- FOREX.com - FOREX.com continues to uphold its stature as a premier FX broker, offering over 80 currency pairs and boasting some of the most competitive fees in the industry. With EUR/USD spreads dipping as low as 0.0 and $5 commission per $100k, it stands out. Moreover, its SMART Signals help to identify price behaviors across numerous major currency markets.
- NinjaTrader - NinjaTraders supports the trading of popular currencies including the EUR/USD. The software also offers advanced features to streamline the trading experience, including complex order types like market if touched (MIT) and one cancels other (OCO).
- OANDA US - OANDA offers a diverse selection of 68 currency pairs, more than many alternatives. The broker’s in-house platform offers superb day trading capabilities via powerful TradingView charts, including 65+ technical indicators and 11 customizable chart types.
- IG - IG offers an above-average suite of 80+ currency pairs on its proprietary web platform, mobile app or MetaTrader 4, with more advanced charts and forex analysis tools available on the ProRealTime software. Forex spreads are competitive based on tests, starting from 0.1 pips on majors like the EUR/USD.
- Interactive Brokers - IBKR presents an extensive range of over 100 major, minor, and exotic forex pairs, surpassing the offerings of nearly all leading alternatives, though not CMC Markets. Forex trading occurs over multiple platforms and boasts institutional-grade spreads starting from 0.1 pips and 20 complex order types, including brackets, scale, and one-cancels-all (OCA) orders.
- Videforex - Trade 35 major, minor and exotic forex pairs through CFDs with floating spreads from 0.1 pips. Alternatively, binary options allow you to speculate on rising and falling prices with a fixed stake and payout.
- Plexytrade - Plexytrade presents major, minor, and exotic forex pairs for trading, with leverage reaching 1:2000 and raw spreads starting from 0.0 - an enticing proposition for advanced traders seeking gains from minor price shifts. However, the downside lies in the limited selection, with only 41 currency pairs available, significantly fewer than the 100+ forex assets at IG.
- RedMars - RedMars strongest investment category is forex with more than 50 currency pairs, from majors to minors and exotics. Spreads start from 0.0 pips, catering to active currency traders, and leverage can reach 1:500. However, there are no forex heatmaps or research tools to support aspiring forex traders.
- DNA Markets - DNA Markets continues to deliver an excellent environment for forex traders with 50+ currency pairs and low spreads from 0.0 pips on the EUR/USD during tests. The MetaTrader 4 platform, available on desktop, web and mobile, was also designed specifically for forex trading.
- World Forex - World Forex offers CFD and digital contract trading on 53 forex pairs, including EUR/USD and GBP/EUR. High leverage is available for CFDs, which can be accessed with competitive spreads on certain account types.
Trading USD/JPY Comparison
FOREX.com
"FOREX.com remains a best-in-class brokerage for active forex traders of all experience levels, with over 80 currency pairs, tight spreads from 0.0 pips and low commissions. The powerful charting platforms collectively offer over 100 technical indicators, as well as extensive research tools."
Christian Harris, Reviewer
FOREX.com Quick Facts
Bonus Offer | Active Trader Program With A 15% Reduction In Costs |
---|---|
GBPUSD Spread | 1.3 |
EURUSD Spread | 1.2 |
EURGBP Spread | 1.4 |
Total Assets | 80+ |
Leverage | 1:50 |
Platforms | MT4, MT5, TradingView, eSignal, AutoChartist, TradingCentral |
Account Currencies | USD, EUR, GBP, CAD, AUD, JPY, CHF, PLN |
Pros
- There’s a wealth of educational resources including tutorials, webinars, and a stacked YouTube channel to help you get educated in the financial markets.
- Alongside a choice of leading platforms, FOREX.com offers a superb suite of supplementary tools including Trading Central research, SMART Signals pattern scanner, trading signals, and strategy builders.
- With over 20 years of experience, excellent regulatory oversight, and multiple accolades including runner-up in our 'Best Forex Broker' awards, FOREX.com boasts a global reputation as a trusted brokerage.
Cons
- Demo accounts are frustratingly time-limited to 90 days, which doesn’t give you enough time to test day trading strategies effectively.
- FOREX.com's MT4 platform offers approximately 600 instruments, significantly fewer than the over 5,500 available on its non-MetaTrader platforms.
- Despite increasing its range of instruments, FOREX.com's product portfolio is still limited to forex and CFDs, so there are no options to invest in real stocks, real ETFs or real cryptocurrencies.
NinjaTrader
"NinjaTrader continues to meet the demands of active futures traders looking for low fees and premium analysis tools. The platform hosts top-rate charting features including hundreds of indicators and 10+ chart types."
Tobias Robinson, Reviewer
NinjaTrader Quick Facts
GBPUSD Spread | 1.6 |
---|---|
EURUSD Spread | 1.3 |
EURGBP Spread | 1.6 |
Total Assets | 50+ |
Leverage | 1:50 |
Platforms | NinjaTrader Desktop, Web & Mobile, eSignal |
Account Currencies | USD |
Pros
- You can get thousands of add-ons and applications from developers in 150+ countries
- NinjaTrader is a widely respected and award-winning futures broker and is heavily authorized by the NFA and CFTC
- Low fees are offered, with $50 day trading margins & commissions from $.09 per micro contract
Cons
- There is a withdrawal fee on some funding methods
- The premium platform tools come with an extra charge
- Non forex and futures trading requires signing up with partner brokers
OANDA US
"OANDA remains an excellent broker for US day traders seeking a user-friendly platform with premium analysis tools and a straightforward joining process. OANDA is also heavily regulated with a very high trust score."
Jemma Grist, Reviewer
OANDA US Quick Facts
GBPUSD Spread | 3.4 |
---|---|
EURUSD Spread | 1.6 |
EURGBP Spread | 1.7 |
Total Assets | 65+ |
Leverage | 1:50 |
Platforms | OANDA Trade, MT4, TradingView, AutoChartist |
Account Currencies | USD, EUR, GBP, CAD, AUD, JPY, CHF, HKD, SGD |
Pros
- The proprietary OANDA web platform continues to deliver a highly competitive charting environment, including 65+ technical indicators powered by TradingView
- Seasoned day traders can access industry-leading tools, including an MT4 premium upgrade and advanced charting provided by MotiveWave
- OANDA is a reliable, trustworthy and secure brand with authorization from tier-one regulators including the CFTC
Cons
- There's only a small range of payment methods available, with no e-wallets supported
- It's a shame that customer support is not available on weekends
- The range of day trading markets is limited to forex and cryptos only
IG
"IG continues to provide a comprehensive package with an intuitive web platform and best-in-class education for beginners, plus advanced charting tools, real-time data, and fast execution speeds for experienced day traders."
Christian Harris, Reviewer
IG Quick Facts
GBPUSD Spread | 0.9 |
---|---|
EURUSD Spread | 0.8 |
EURGBP Spread | 0.9 |
Total Assets | 80+ |
Leverage | 1:30 (Retail), 1:250 (Pro) |
Platforms | Web, ProRealTime, L2 Dealer, MT4, AutoChartist, TradingCentral |
Account Currencies | USD, EUR, GBP, CAD, AUD, JPY, ZAR, SEK, DKK, CHF, HKD, SGD |
Pros
- IG is amongst the best in terms of its range of instruments, which includes stocks, forex, indices, commodities, and cryptocurrencies, providing ample diversification opportunities
- The ProRealTime advanced charting platform is free as long as certain modest monthly trading activity requirements are met
- The IG app offers a superb mobile trading experience with a clean design that helped it secure Runner Up at our Best Trading App award
Cons
- Beginners might find IG’s fee structure complex, with various fees for different types of trades or services, potentially leading to confusion or unexpected charges
- IG applies an inactivity fee of $12 per month after 2 years, deterring casual investors
- Stock and CFD spreads still trail the cheapest brokers like CMC Markets based on tests
Interactive Brokers
"Interactive Brokers is one of the best brokers for advanced day traders, providing powerful charting platforms, real-time data, and customizable layouts, notably through the new IBKR Desktop application. Its superb pricing and advanced order options also make it highly attractive for day traders, while its diverse range of equities is still among the best in the industry."
Christian Harris, Reviewer
Interactive Brokers Quick Facts
GBPUSD Spread | 0.08-0.20 bps x trade value |
---|---|
EURUSD Spread | 0.08-0.20 bps x trade value |
EURGBP Spread | 0.08-0.20 bps x trade value |
Total Assets | 100+ |
Leverage | 1:50 |
Platforms | Trader Workstation (TWS), IBKR Desktop, GlobalTrader, Mobile, Client Portal, AlgoTrader, OmniTrader, eSignal, TradingCentral |
Account Currencies | USD, EUR, GBP, CAD, AUD, INR, JPY, SEK, NOK, DKK, CHF, AED, HUF |
Pros
- While primarily geared towards experienced traders, IBKR has made moves to broaden its appeal in recent years, reducing its minimum deposit from $10,000 to $0.
- IBKR continues to deliver unmatched access to global stocks with tens of thousands of equities available from 100+ market centres in 24 countries.
- The TWS platform has clearly been built for intermediate and advanced traders and comes with over 100 order types and a reliable real-time market data feed that rarely goes offline.
Cons
- You can only have one active session per account, so you can’t have your desktop program and mobile app running simultaneously, making for a sometimes frustrating trading experience.
- TWS’s learning curve is steep, and beginners may find it challenging to navigate the platform and understand all the features. Plus500's web platform is much better suited to new traders.
- Support can be slow and frustrating based on tests, so you might find it challenging to reach customer service representatives promptly or encounter delays in resolving issues.
Videforex
"Newer traders will find a lot to enjoy about trading binary options on Videforex's easy-to-use proprietary platform, as well as the broker's copy trading solution. Payouts also remain higher than most alternatives climbing to 98%."
William Berg, Reviewer
Videforex Quick Facts
Bonus Offer | 20% to 200% Deposit Bonus |
---|---|
GBPUSD Spread | Floating from 0.1 pips |
EURUSD Spread | Floating from 0.1 pips |
EURGBP Spread | Floating from 0.1 pips |
Total Assets | 35 |
Leverage | 1:500 |
Platforms | TradingView |
Account Currencies | USD, EUR, GBP, AUD, RUB |
Pros
- You can easily mirror the trades of experienced investors with low fees
- Traders can earn up to 98% payouts on 100+ assets with the broker’s binary options, which is in line with competing brands like IQCent
- Global clients can make free and fast transfers via a wide range of payment types, from credit cards to cryptocurrencies
Cons
- No MetaTrader 4 integration
- US clients aren’t accepted due to legal restrictions
- The broker isn’t overseen by a trusted regulatory agency
Plexytrade
"Plexytrade is a newcomer in the brokerage scene with attention-grabbing features like 1:2000 leverage, zero spreads on select instruments and fast execution speeds of less than 46 milliseconds. However, the absence of regulation is a significant concern, while the non-existent research and educational tools place it far behind industry frontrunners."
Christian Harris, Reviewer
Plexytrade Quick Facts
Bonus Offer | 120% Cash Welcome Bonus |
---|---|
GBPUSD Spread | 0.8 |
EURUSD Spread | 0.7 |
EURGBP Spread | 1.1 |
Total Assets | 40+ |
Leverage | 1:2000 |
Platforms | MT4, MT5 |
Account Currencies | USD, EUR |
Pros
- Plexytrade accommodates a range of trading methods and short-term strategies, including scalping, hedging, and automated trading.
- Despite lacking regulation, Plexytrade provides negative balance protection and reinforces safety protocols by holding client funds in segregated accounts.
- There are various VPS packages starting from $50 per month, but they become complimentary once specific deposit thresholds are reached.
Cons
- With around 100 instruments, Plexytrade restricts the flexibility of investors who prefer to trade across various assets, especially compared to Blackbull with its 26,000 securities.
- There are no research and educational materials, falling short of alternatives like IG, while access to the economic calendar is restricted to clients with balances of $500.
- There are no social or copy trading features for inexperienced traders to replicate the trades of more experienced investors, trailing category leaders like eToro.
RedMars
"RedMars is the best fit for experienced day traders familiar with the MetaTrader 5 platform and based in the EU, where the broker is authorized by the CySEC. However, the threadbare education and research tools make it unsuitable for beginners."
Christian Harris, Reviewer
RedMars Quick Facts
GBPUSD Spread | 0.7 |
---|---|
EURUSD Spread | 0.7 |
EURGBP Spread | 1.1 |
Total Assets | 50+ |
Leverage | 1:30 (Retail), 1:500 (Pro) |
Platforms | MT5 |
Account Currencies | USD, EUR |
Pros
- RedMars offers one of the best platforms for day trading, MT5, hosting 21 timeframes, dozens of analytical tools, flexible templates and algo trading
- The broker is one of a limited number of firms to offer an account specially designed for VIPs with premium support and invites to exclusive events
- The broker supports a range of flexible payment methods, including wire transfers, credit cards, e-wallets, and notably cryptocurrencies
Cons
- With just 300 instruments, RedMars offers a narrow trading environment, particularly compared to category leaders like BlackBull Markets which offers 26,000 assets
- The no-frills trading environment offers little beyond the basics, with no Islamic account, PAMM account or copy trading.
- While RedMars' spreads are within industry averages, they don't offer a significant edge over the cheapest day trading brokers we've personally used, notably IC Markets
DNA Markets
"DNA Markets is an excellent choice for short-term traders familiar with the MetaTrader platforms. The smooth sign-up process also makes it easy to get started while the $100 minimum deposit is accessible. That said, DNA Markets trails the top brokers in education, research and mobile trading. "
Jemma Grist, Reviewer
DNA Markets Quick Facts
GBPUSD Spread | 1.0 |
---|---|
EURUSD Spread | 1.0 |
EURGBP Spread | 1.0 |
Total Assets | 50+ |
Leverage | 1:500 |
Platforms | MT4, MT5 |
Account Currencies | USD, EUR, GBP, CAD, AUD, NZD, SGD |
Pros
- The broker provides 24/5 customer support with response times of <2 minutes during testing
- Short-term trading strategies are permitted including scalping and automated trading using Expert Advisors (EAs)
- After a recent upgrade, there are now over 800 assets available to trade via CFDs, with a particularly impressive range of 120+ cryptos
Cons
- Although it continues to strengthen its client base and reputation, DNA Markets lacks the track record of top brokers like Vantage
- Unlike many alternatives, there are limited educational and research tools for traders seeking an all-in-one solution
- Despite access to MT4 and MT5, there is no proprietary trading app for seamless account management whilst on the go
World Forex
"World Forex provides both highly leveraged CFDs and digital contracts, making this a good broker for clients who want flexible and rewarding ways to trade. The copy trading service will also appeal to newer traders."
Tobias Robinson, Reviewer
World Forex Quick Facts
Bonus Offer | 100% Deposit Bonus |
---|---|
GBPUSD Spread | From 0.6 |
EURUSD Spread | From 0.6 |
EURGBP Spread | From 0.6 |
Total Assets | 53 |
Leverage | 1:1000 |
Platforms | MT4, MT5 |
Account Currencies | USD, EUR, RUB |
Pros
- Demo account
- Swap-free account available
- Copy trading solution
Cons
- Weak regulation
- Withdrawal fees apply
- No negative balance protection
Chart
Breaking Down ‘USD/JPY’
Firstly, what precisely does USD/JPY actually mean? Quite simply, it represents the exchange rate between the US dollar and Japanese yen. So, the figure you see quoted is how many Japanese yen you need to buy one US dollar. The US dollar is the base currency in this major currency pair.
Rich volatility and volume see a daily turnover in excess of $900 billion. This makes the USD/JPY the second most traded currency pair in the world, after the EUR/USD. Furthermore, it’s responsible for approximately 17.7% of the forex daily turnover.
Why Day Trade USD/JPY?
There are a number of reasons why realtime USD/JPY day trading is an enticing prospect. Some of the most appealing characteristics are as follows:
- Relatively low spreads – The USD/JPY remains popular. This is partly because of its comparatively low bid-ask spreads.
- Volatility – This currency pair displays high levels of volatility, often driven by Asian market forces. As a result of this implied volatility, day traders have plenty of opportunities to turn a profit.
- Volume – As it is based on two of the most active currencies in the world, market volume is huge. As a result, this popularity ensures finding trading tips and forex signals is relatively easy.
- Predictability – The USD/JPY market is often linked to commodities trading in Japan. So, research and analysis are relatively straightforward. In fact, you can look to global imports and exports to gauge market sentiment.
- Diverse trading vehicles – As such a popular currency pair, there are numerous trading vehicles you can use to generate profits. From E-mini and E-micro USD/JPY futures to options, ETFs, and more.
- Beginner friendly – Relatively smooth trends and fantastic liquidity makes the USD/JPY pair appealing to both beginners and experienced traders.
- Availability of resources – In many ways, conducting technical analysis from with a streaming chart is easier now than ever before. This is because you have direct access to bar charts, average daily ranges, exchange rate history graphs, and more. For example, conducting Elliott wave analysis is more straightforward. In addition, there is an active online trading community, in the form of blogs. Also, websites offer up-to-date market reviews and hourly forecasts.
So, firstly this pair is one of the most actively traded. Also, technical outlook and availability of resources add to the benefits the USD/JPY currency pair offers.
USD/JPY Drawbacks
Before you load up your live online USD/JPY chart and decide whether to buy or sell, you should also be aware of the associated drawbacks and risks:
- BoJ intervention – The BoJ has a habit of intervening in the forex market when price action and movements may threaten economic growth and the Japanese export industry. So, traders must keep abreast of BoJ developments. If not, you may be in be for a short, sharp, and expensive surprise.
- Volatility – Whilst volatility is a benefit, it can also mean sudden price fluctuations. If traders aren’t vigilant, a winning position can quickly become a costly loss. For example, natural disasters can have a huge impact on their closed economy. So, the USD/JPY is accompanied by a serious degree of risk.
- Dangers of leverage – Whilst borrowing funds enables you to capitalise on winning opportunities, it can also amplify losses. So, when margin trading is used with a volatile pair like the USD/JPY, it can be all too easy to lose serious capital.
- Automated competition – Traders of today face a significant challenge in the form of trading algorithms. These intelligent bots can use yearly charts and current drops to make forecasts now. You’re still manually drawing head and shoulders patterns. However, these automated systems are already entering and exiting positions. As a result, competitive forward rates and US dollar vs Japanese yen forecasts for this coming week are more important than ever.
Overall, the USD/JPY pair has its advantages. However, it also comes with challenges. This is all the more reason to learn how to read the USD/JPY and conduct a thorough market analysis.
Influences On Movement
Accurate USD/JPY chart investing requires a detailed understanding of what causes movement. Therefore, the most significant influences are as follows:
- Economic strength – The greatest influence on the USD/JPY relationship will always be respective economic strength. When the US economy suffers, the yen is likely to strengthen, and vice versa. Unemployment rates, wage growth and industrial production are just some of the key economic indicators.
- Japanese imports vs exports – When the Japanese import more than they export, the US dollar strengthens against the yen, as they are purchasing more than they are selling. On top of that, because Japan is a huge exporter, trading relations with countries such as China can also impact the USD/JPY pair.
- Japanese national disasters – Due to its size, any natural disasters can have a substantial effect. However, the US economy is unlikely to be impacted to such a significant extent.
- Pace of currency growth – On the whole, the US economy grows at a much faster rate than that of Japan. In fact, the yen has been growing slowly in recent years. As a result, this means there has been a consistent downward trend against the US dollar.
- Government intervention – The Federal Reserve of the US (Fed) and the BoJ are responsible for monetary policies. Although this is currently of particular importance in Japan. This because the government has introduced a number of initiatives to bolster the economy. So, traders should pay close attention to any breaking news in relation to new measures, such as changes to interest rates, quantitive easing, and inflation.
To conclude, spotting trade opportunities in the USD/JPY requires an understanding of how these underlying forces work to tip the balance in favour of each currency. With that knowledge, telling whether prices will start going up or down may be easier.
Currency Correlations
Currencies do not move independently of each other and the USD/JPY pair is no exception. In fact, the USD/CHF and EUR/USD are the two other pairs with the highest correlation to the USD/JPY. The former has a positive correlation, and the latter a negative correlation.
- Positive correlation – This is when currency reacts in line with each other. For example, GBP/USD, AUD/USD, and EUR/USD are all correlated. This is a result of the US dollar being the counter currency, so any changes in the US dollar will be felt in all pairs.
- Negative correlation – When currency pairs move in the opposite direction, they are negatively correlated. In fact, this happens in the USD/JPY, USD/CHF, and USD/CAD. This is a result of the US dollar being the base currency.
Of course, it isn’t quite that straightforward, the degree of correlation can also change. It is taken as a measurement from -1 to +1. So, an understanding of this will allow you to use movements in other pairs to predict fluctuations in the USD/JPY.
In fact, there are several Japanese yen pairs that are highly correlated to the USD/JPY:
- CAD/JPY
- CHF/JPY
- EUR/JPY
- SGD/JPY
- HKF/JPY
USD/JPY & Gold Correlation
It’s also worth pointing out that although gold is not a currency per say, as a result of electronic trading capabilities, it is now traded in much the same way. The yen is actually highly correlated to gold. So, USD/JPY and XAU/USD (gold/US dollar) are negatively correlated. The higher USD/JPY moves, the lower gold usually goes.
So, technical analysis now needs to cover more than the basics of support and resistance levels. If you can also utilise currency correlations to your advantage, you may be able to factor greater returns into your profit calculator.
USD/JPY Day Trading Strategy
Timing
Whether you opt for a USD/JPY scalping or breakout strategy, when you trade could make all the difference to your intraday profits. This is because in the day trading forex space, timing is everything.
Capitalising on USD/JPY targets requires trading during prime time slots. FX day trading may be available 24/7, but you could be better off focusing on quality rather than quantity.
Normally, when London and Europe are open for business, pairs with the Euro, British pound, and Swiss franc are most actively traded. Then, when New York opens, currency pairs with the US dollar and Canadian dollar gather momentum.
The USD/JPY, however, doesn’t quite follow this tradition. The pair sees relatively consistent volume throughout the day, of course with occasional spikes in volatility. Having said that, it is fairly accepted that the best time day trade the USD/JPY is between 1200 and 1500 GMT. Both London and New York are at full pace in this period. Although Tokyo’s opening time comes afterwards, the biggest daily moves often take place during this time frame.
At these times, you will also benefit from the tightest spreads and potentially the greatest opportunities to generate profits. So, check for intraday volatility and focus your trading capital into this time slot.
Rise & Shine
Determined USD/JPY day traders are at their desk premarket, preparing for the trading day ahead. Furthermore, they may have their economic calendar in front of them, along with historical exchange rate data on an Excel spreadsheet. Whilst everyone else is just waking up, they’ve poured through discussion forums and data, so they have clear expectations for the day ahead. Related stock shifts and daily pivot points may surprise others, but early risers are often ready and waiting to react. By closing time, unlike most, they haven’t sunk into the red.
So, in the forex world, where short and sharp reversals are a regular occurrence, preparation is key. Even if it means working outside of your normal market hours.
Simple Moving Average Cross & Bounce
The good news is, the USD/JPY is ideal for intraday trading. In fact, you can often see spikes between the 20 to 40 pip range within the first few minutes of the market’s opening. So, what strategy can you use to capitalise on rich price action movement?
The simple moving average cross and bounce is a straightforward strategy to set up and execute. Although some prefer USD/JPY 15-minute charts, this technique works best with a 4-hour candlestick chart.
The indicators you will need are as follows:
- MA (50/200)
- BB (20)
Buy Entry Rules
1. The BB (MA20) must be above MA (50).
2. Price needs to cross above both BB (MA20) and MA (50).
3. Price also must test BB (MA20) as support whilst above MA (50).
4. Look for bullish confirmation candle from support.
5. Enter a buy/long entry.
Sell Entry Rules
1. BB (MA20) needs to be below MA (50).
2. Price has to cross below both BB (MA20) and MA (50).
3. Price needs to test BB (MA20) for the resistance whilst staying below MA (50).
4. Look for a bearish confirmation candle from resistance.
5. Place a short/sell entry.
To minimise risk you should also look to incorporate stop-losses. So, place a stop-loss at the bottom/top wick of the confirmation candle, dependant of course, on whether you are buying or selling. You should then allow the price to move in the trade direction.
Once the price retests MA (20), you should move the stop-loss to the top/bottom wick of the candle. Keep repeating this until the price no longer stays above/below MA (20) and hits the stop-loss.
News
The latest market news updates on the USD/JPY currency pair can quickly affect market sentiment and lead to shifts. However, you can only capitalise on these moments if you understand how the markets reacted last time something like this happened.
So, to keep abreast of live news updates, recommendations, daily, weekly, and monthly forecasts, plus technical analysis and commentary, consider some of the popular resources below:
- Bloomberg
- Forex Factory
- Yahoo Finance
- Google Finance
- Reuters
- CNBC
In addition, here are just a few more benefits some of the sources above can offer:
- Daily forex outlook.
- Latest USD/JPY forecasts for 2018.
- Historical prices.
- 20-years, 30-years, and 50-years worth of historical graphs and long-term charts.
- Trading definitions.
- Weekly and monthly data.
- An overview of yesterday’s USD/JPY performance and prices.
Regardless of whether your USD/JPY strategy focuses on resistance and support levels, or whether it centres around news events, being aware of current updates in the forex space could seriously enhance your technical analysis.
History
Japanese Economy
To make accurate USD/JPY predictions and forecasts, it also helps to understand some key events in the pair’s relationship.
Japan may lack natural resources and geographic size, but their work ethic, success with technologies, and boundary-pushing manufacturing techniques have ensured the economy has flourished since the damage it suffered in World War II. As a result, today the Japanese economy stands as the largest after the US and China.
However, historical data and news show us the Japanese economy came upon hard times in the early 1990s. This is because the real estate and domestic equity bubbles burst. As a result, the economydecelerated and there was substantial deflation.
However, the last twenty years have seen the introduction of a number of measures by the Japanese government and Bank of Japan (BoJ) to rejuvenate the economy. Whilst not totally successful, there is little debate that their economy today is a major player on the global stage.
Why does all this matter if you want to start day trading on the USD/JPY? Because an understanding of what and how previous factors have influenced economic strength and growth will give you a clearer future forex outlook. All of which may result in more accurate predictions and forecasts.
Japenese Yen
Since its introduction in July of 1871, the yen has flourished, becoming the most traded currency in Asia, and the third most popular in the world, following the US dollar and euro. On the whole, when the Japanese economy performs well, the yen increases in strength against the dollar.
In fact, steps that were taken to keep interest rates low to stimulate the economy have lead to the yen becoming an increasingly popular carry trade. This is where investors sell the yen to buy higher-yielding currencies. This constant selling has kept the yen at a much lower trade level than it may have reached otherwise. See our carry trade page for more details.
In conclusion, this all means USD/JPY traders need to keep abreast of new data and information about Japan’s economic growth and recovery. So, if a rise in rates takes place and the popularity of the yen carry trade diminishes, this could result in a strengthening of the yen.
US Dollar
The US dollar has been the standard US monetary unit for over two hundred years. However, whilst the Japanese yen and the economy suffered from World War II, the years that followed the war saw the US economy and dollar boom. This is partly because of the 1944 Bretton Woods Agreement.
In fact, if you load up a graph and look at USD/JPY historical exchange rate data, you will quickly see this agreement played a huge part in securing the success of the US dollar. Specifically, it ensured the US dollar’s place as the world’s official reserve currency.
Recent History
The USD/JPY relationship has seen significant fluctuations in recent years. Both currencies and economies have had their ups and downs. 2013 in particular, highlighted some interesting results. For example:
- The US dollar was on one side of a staggering 87% of all forex trades.
- The Japanese yen, however, saw the largest increase in trading activity of the other major currencies, rising by 63% from 2010.
- Also, in April of 2013, the USD/JPY trading reflected 18.3% of total FX turnover, an increase of 4% from just three years ago.
USD/JPY historical data has shown both economies and currencies have had their moments in recent years. However, understanding what has caused their successes and shortfalls will enable you to better predict and react to future reports.
Role of USD ![Day trading the USD/JPY currency pair](https://www.daytrading.com/wp-content/uploads/2018/01/USD-JPY-min-300x206.png)
You can’t get a clear view of the USD/JPY relationship without understanding the significant role the US dollar plays. So below are just a few ways it holds a unique position in global finance:
- Numerous banks around the world hold currency reserves in US dollar.
- Many small countries even opt to use US dollar instead of their own currency or peg their currency to its value.
- OPEC countries also use the US dollar to conduct oil transactions.
- It is often used to settle international financial transactions.
- Gold prices and other popular commodities are also frequently set in US dollars.
- It is currently the most commonly traded currency in the world.
- The US is the second largest trading nation, after China.
- The US represents around 25% of the global nominal GDP.
- Services such as real estate, financial services, transportation, and healthcare form nearly 80% of its GDP.
Aspiring day traders would be wise to get an understanding of the reach and prominence the US dollar holds. In fact, monitoring US economic strength will help you to forecast how the USD/JPY will strengthen or weaken in favour of the US dollar. However, effective monitoring means looking out for signals and economic indicators. Some of the key reports to follow include:
- Trade Balance
- Consumer Price Index (CPI)
- Producer Price Index (PPI)
- Non-farm payrolls
- ISM Non-manufacturing
- ISM Manufacturing
- Trade Balance
- Federal Reserve Minutes
- Retail Sales
- Industrial production
So, by looking at charts and historical graphs, you get a feel for why certain currency pairings react as they do. Hourly charts and key levels may be important for your forex outlook today, but so too is information on events decades ago. Overall, all will enhance your understanding of what drives movement in the USD/JPY currency pair.
Role of JPY![Day trading on the USD/JPY currency pair](https://www.daytrading.com/wp-content/uploads/2018/01/USD-JPY-day-trading-min-300x227.png)
It’s all too easy to focus your attention on the strength and role of the US dollar. However, the Japanese yen also plays a vital role. This is because it is the most liquid currency in Asia. Which also makes it a gauge for Asian economic growth.
In times of economic instability and volatility in Asia, traders often respond by buying or selling the yen. This is because other Asian currencies are more challenging to trade. A spike of which, can seriously impact market prices and quotes for the USD/JPY.
Also, it is traded in such high volume because the yen is accompanied by extremely low-interest rates. In recent years, the BoJ has purchased a substantial volume of yen to increase inflation. As a result, the ven has devalued alongside the increase of money supply. Exports surge, as do the price of imports, particularly commodities.
Due to its ranking as the third most traded currency after the US dollar and euro, it is also the world’s fourth reserve currency, following the US dollar, euro, and pound sterling.
Understanding the yen’s global role will allow you to better evaluate trends in the USD/JPY, not to mention conduct realtime fundamental analysis.
Final Word
In conclusion, the USD/JPY currency pairing ranks second for liquidity. In addition, its behaviour promises day traders precisely the volume and volatility required to yield profits. However, competition is fierce and an understanding of all the market forces at play will be needed to assert an edge.
So, you will have to conduct your own expert analysis, using interactive daily, weekly, and historical charts to make accurate projections. You will also need a forex trading platform that compliments your trading style. However, if you tick those boxes, plus utilise the resources outlined on this page, generating those rich forex profits may be a possibility.
For more guidance, see our forex page.