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How to Trade USD/JPY: The Ultimate Guide

USD/JPY is a very popular currency pair among traders. What’s more, it is one of the most traded instruments on the market. The asset boasts a significant volume of daily trading with millions of market participants involved across the globe.


Both proven veterans and beginners choose to trade USD/JPY due to a set of crucial benefits. In this article, we will discuss major reasons why the currency pair can bring your trading approach to a new level.

When Is It Time to Trade USD/JPY?

Round-the-clock market availability is one of the major benefits to opt for trading. Hoverer, historically it is better to buy and sell currencies during the most active trading hours. They will vary depending on your location.

For example, traders from the UK prefer buying and selling pairs between 8 a.m. and 5 p.m. It is the most active timeframe featuring higher traded volumes, which means more trading opportunities and deeper liquidity.

There is also a common rule for all locations. When you trade YS/JPY (just like other major currency pairs), it is better to operate around market announcements and market news.

The History behind the USD/JPY Currency Pair

The pair expresses the relation between the USD and the Japanese yen. While USD hardly requires introduction as one of the world’s strongest currencies representing one of the most powerful economies, JPY turns out to be the third most-traded instrument. What’s more, it takes the 4th position in the list of reserve currencies (after the US dollar, euro, and pound sterling).

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Officially established in 1871, the yen has been boasting a considerable value growth backed by the nation's industrial complex. Japan is known for its technological developments, innovations in healthcare and agriculture in addition to a set of exportable products, which make it possible for the yen to stay among top currencies.

Factors that Influence USD/JPY

To understand, how different factors affect the currency pair, we need to clarify the role of each currency:

  • The Role of USD. The US dollar is the most traded currency in the world. Different factors can affect it. The first and foremost is the regular report issued by the FED. It provides influential data that makes it possible to predict future market movements and make decisions accordingly. Additionally, traders must constantly monitor economic and political events, FED announcements about the interest rate and monetary policy, and so on. Even the slightest occasional crises can change the currency exchange rate fluctuation. The good news is that finding needed news will not be a problem when dealing with the USD. Traders can use a variety of information sources and official reports.
  • The Role of JPY. The situation with the yen is a bit more complicated. The country comes with more complex factors that can affect the exchange rate in any way. First of all, we need to take into account several major points. They include the nation’s general economic health, events in politics, import/export volume, and so on. Additionally, we need to consider other factors that can also be quite influential, for example, natural disasters that may occur in different regions of Japan. They can result in significant fluctuation of the US/JPY pair. To generate necessary data and predict further market moves, one can use the BOJ (Bank of Japan) reports. They are regularly released to deliver fundamental information to all market participants. The data is delivered via the Tokyo Are CPI and Tankan Report as the major sources. Also, try to take seriously different financial announcements as well as official political news.

Tips to Trade USD/JPY

While some traders prefer a traditional way to buy and sell USD/JPY (a contract) others benefit from trading CFDs (contracts for difference), as one of the simplest ways to speculate on the currency price difference.

The idea behind CFD trading is very simple. It expresses an agreement between two parties (an investor and an online broker) to pay the difference in the asset value. The difference is indicated during the trade’s start and end timeframe.

Trades will have two major options are part of their strategies:

  1. Enter with a long position and speculate on the price going up.
  2. Enter with a short position and speculate on the price falling down.

Additionally, you can predict the direction of the underlying asset and speculate on its moves. If you expect the USD to gain value, entering a long position and purchasing CFDs can be a wise decision. If you are sure the currency will lose value against JPY, it is better to enter with a short position and sell CFDs. Another way is to use typical contracts and trade USD/JPY in a traditional way.

The Bottom Line

The concept of trading USD/JPY hardly differs from the one used to trade other major currencies. The only difference here is that the Japanese yen can be influenced by some factors that are more complex compared to the USD.

Nevertheless, it is still one of the most traded currency pairs. The asset is backed by two strong economies, which makes this option safe and simple to get started with. traders can use traditional contracts or trade USD/JPY as CFDs.

This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.