USD/JPY refers to the currency pairing of the US Dollar and the Japanese Yen. Think of it as the ticker for the USD to JPY exchange rate in the forex market. Widely considered as the next most popular and liquid currency pair next to the EUR/USD, this pair remains a favorite choice among forex traders because of the volatility it provides and busy activity even during the Asian trading hours—thus making it an active currency tandem for 24 hours.

In USD/JPY, the US Dollar is the base currency, while the Japanese Yen is the quote currency. For example, if the current price of USD/JPY is 100, it indicates 100 Japanese Yen is required to buy 1 US dollar.

Many traders call this pair 'the Ninja', while some as the 'Gopher". The value of these pairing when pitted against each other is often influenced by the interest rate differential between the Bank of Japan and the Federal Reserve of the United States.

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History of the USD/JPY

As the main reserve currency in the planet, the US dollar also works well when traded with other currencies. The Japanese Yen, despite its historically small value, has always been one of the world's major currencies. In fact, during the 1980s, the Yen gave the US Dollar a run for its money for the distinction of being the king currency.

However, Japan's economic boom reached its plateau and the Yen never overtook the US dollar, but it continued being one of the most dominant in the forex market—holding the fourth place in the list of the world's biggest reserve-held currency.

Since Japan plays a huge role in the import and export industry, it holds a strong influence in affecting the world market including the forex exchange. With the Japanese Yen forming the most liquid currency in the continent of Asia, it make sense that a pairing with the US Dollar bodes well with the economic growth in the region and the rest of the world.

USD/JPY currency pair
USD/JPY currency pair

Pros of Trading USD/JPY

  • High daily liquidity: This create numerous trading opportunities generated by the pair's volatility. Because the pair is strongly related to Japan's commodities market, the price swings produced by the USD/JPY's liquidity make the price movement easier to predict as compared to other currency pairs.

  • Low bid-ask spreads: This pair features low spreads that forces trading activities and increased potential yields.

  • The USD/JPY is US and Japan news-centric: When trading this pair, it is very easy to keep track of its movement or predict its future trend because it is highly dependent on events and news coming from Japan and the United States. So, basically you just need to watch out for any rough week in the US or Japan market.

Economic Triggers That May Affect USD/JPY

Other than negative economic news from Japan and the United States, other market factors includes the following:

  • Japanese interest rates
  • Gross Domestic Product of both countries
  • Wage growth
  • Consumer price index
  • Economic and political events in countries where Japan is highly engaged in trading such as China, South Korea, the European Union and other Asian countries.

When Is the Best Time to Trade USD/JPY?

Traders like the window starting from 12:00 until 15:00 GMT because this is when the forex market activity is as its busiest. The two giant markets in London and New York overlap during these hours.

The US market trading activity which happens before the Japanese market opens, tends to generate influence on the world trading volume or demand for the USD/JPY currency pair, therefore giving more benefits to traders who are active during the trading hours in the United States.

What Makes USD/JPY an Attractive Currency Pair?

The pairing of the US dollar and the Japanese Yen signifies the forex meeting of the Japanese market robust with export businesses in automotive and electronics and the United States market and its most traded US dollar currency. With the Yen occupying the spot of third most traded currency, it makes sense to study how one can maximize yields when trading on this pair.

Trading USD/JPY via CFD

Forex traders are also diving deep into CFD when trading in the world currency market. CFD (Contract-for-Differences) gives traders the freedom to engage in speculating the movement of the forex market even without the requirement of owning physical currencies. With the US dollar and the Japanese Yen enduring as an attractive pair, trading on these two through CFD has brought many trading opportunities to investors.

Contract-for-Difference (CFD) is the agreement between a client and a broker, where one will agree to paying the other the difference in prices from the beginning to the conclusion of the trade. Using the CFD method in trading forex gives forex traders to use greater leverage with the CFD.

Why Trade Currency Pairs in eToro?

Apart from its usability and easy to understand interface, eToro also allow traders to trade on their own time with zero transaction fees on currency trades. eToro also allow traders to trade for $30 for every $1 in their portfolio because it gives out a x30 leverage for currency pairs.

How to Trade USD/JPY Currency Pair on eToro?

  1. Login or create an account with eToro if you don't have one.
    eToro web-based platform
    eToro web-based platform
  2. Click "Discover".
    Clicking "Discover" on eToro
    Clicking "Discover" on eToro
  3. Select "Currencies".
    Selecting Currencies on eToro's platform
    Selecting Currencies on eToro's platform
  4. Choose "USDJPY".
    Looking for USDJPY on eToro's list of commodities
    Looking for USDJPY on eToro's list of commodities
  5. Choose "BUY" or "SELL" depending on the how you wish to trade.
    Buying or selling USDJPY in eToro
    Buying or selling USDJPY in eToro
  6. Enter an amount or number of units you wish to trade.
    Entering amount to invest on USDJPY via eToro
    Entering amount to invest on USDJPY via eToro
  7. Set the stop loss, leverage, and take profit parameters.
    Setting the stop-loss, leverage and take profit on USDJPY trade
    Setting the stop-loss, leverage and take profit on USDJPY trade
  8. Click "Open Trade".
    Executing USDJPY buy order on eToro
    Executing USDJPY buy order on eToro

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Please note that CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 78% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

Past performance is not an indication of future results. Trading history presented is less than 5 complete years and may not suffice as basis for investment decision.

Copy trading is a portfolio management service, provided by eToro (Europe) Ltd., which is authorised and regulated by the Cyprus Securities and Exchange Commission.

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