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Your guide to trading the USD/JPY pair

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Why is the USD/JPY an important market?

The currency pairing of USD/JPY is one of the most traded pairs in the foreign exchange market, representing a significant quantity of daily trading. It's a pairing which is popular amongst veteran traders and newcomers alike.

usdjpy

USD/JPY trading hours

The forex market is available 24 hours a day, but UK trading, in particular, tends to get active from 8:00 AM and taper off from 5:00 PM.  Of course, there will be times during the day when this currency pair experiences higher volumes - typically around major market announcements. 
 
In the following sections, we're going to take a look at the history of the US dollar/Japanese yen, what factors can influence its movements over time, and why exactly USD/JPY trading remains so popular.  
 

History of USD/JPY

To begin our overview of the USD to Japanese yen we're going to explore the history behind both of these currencies.  

The Japanese yen is actually the third most traded currency in the world and - behind the US dollar, euro, and pound sterling – is the fourth reserve currency.  

The yen was officially adopted in 1871 by the Meiji government, and as such has a much more complex and rich history in comparison to some of the relatively newer currencies around the world. Since inception, the value of the yen has grown considerably and this is, in large part, due to the strong Japanese industrial complex. A thriving industry consisting of technological developments, agricultural innovation, and a range of exportable products have all helped the yen. 
 

See the USD/JPY chart below (USD/JPY historical data):

history usdjpy

 

Factors influencing the USD/JPY CFD

All currency pairings are unique and influenced by a variety of factors, which we'll explore in these next two sub-sections. We'll begin with a look at what factors can influence the US dollar, before moving on to the Japanese yen.
 
Role of USD
 
As the most traded currency in the world, the US dollar is affected by a variety of factors. One of the most influential of these are the reports issued by the US Federal Reserve Bank (Fed). This data can help traders understand how the market may change in the future.   
the Bureau of Labor Statistics releases NonFarm Payroll numbers for the US, usually on the first Friday of each month.. This data can produce volatility in the value of the USD, and of course, affect the USD/JPY currency pairing.
 
As with all currencies, economic and political events, and occasional crises can play a part in affecting the fluctuations in the exchange rate. News and data about the US economy and politics are constantly available and should be followed to keep up to date with factors which can influence the markets. 
 
Role of JPY
 
In comparison to other countries, Japan has a much more complex and varied list of factors which can potentially influence the value of the yen. The usual points can play a part - like the general health of the economy, political events, and the import and export trade in the country – however, let's take a look at something you may not have considered.
 
As a small country, the economy of Japan can be affected immensely by events like natural (or national) disasters which occur in the region. These types of events can play havoc with the value of the yen and cause significant fluctuations in USD-JPY exchange rates.
 
Financial institutions, such as the Bank of Japan (BOJ), release regular reports which traders pay attention to when trying to determine future movements. Other pieces of data to look out for are the Tankan Report and the Tokyo Area CPI. Something else to watch are the various government economic initiatives which are issued from time to time in an effort to bolster the strength of the yen - and can clearly affect the USD/JPY rate.

How to trade USD/JPY CFDs

 An individual can trade USD/JPY with either a forex contract or alternatively, they can trade a contract for difference (CFD) on a particular currency pair, and speculate on the price difference.

A CFD is a financial instrument typically between a broker and an investor, where one party agrees to pay the other the difference in the value of a security, between the start and end of the trade. You can either hold a long position (speculating that the price will go up) or a short position (speculating that the price will fall). This is considered a short-term investment or trade as CFDs tend to be used within a limited timeframe.

For instance, to trade the USD/JPY currency pair using CFDs, you speculate on the direction of the underlying asset. If you think the US dollar will appreciate then take a long position by buying the CFDs. If you think the US dollar will lose value against the Japanese yen then you would take a short position by selling CFDs.

You can trade CFDs on USD/JPY right here, right now. Just sign up at Capital.com and use our advanced web platform or download the best-in-class investment app to trade on the go. It will take you just 3 minutes to get started and access the world’s most traded markets.

Why trade USD/JPY CFDs with Capital.com

Advanced AI technology at its core: a Facebook-like news feed provides users with personalised and unique content depending on their preferences. If a trader makes decisions based on biases, the innovative SmartFeed offers a range of materials to put him back on the right track. The neural network analyses in-app behaviour and recommends videos, articles, news to polish your investment strategy.

Trading on margin: providing trading on margin (30:1 for major forex pairs), Capital.com gives you access to the USD/JPY pair with the help of CFDs.

Trading the difference: by trading CFDs on USD/JPY, you speculate on the rise or fall of its price. CFDs trading is no different from traditional trading in terms of its associated strategies. A CFD trader can go short or long, set stop and limit losses and apply trading scenarios that align with his or her objectives.

All-round trading analysis: the browser-based platform allows traders to shape their own market analysis and forecasts with sleek technical indicators. For instance, a trader could choose to have USD/JPY analysis and forecasts as a big part of their feed. Capital.com provides live market updates and various chart formats, available on desktop, iOS, and Android.

Focus on safety: Captal.com puts a special emphasis on safety. Licensed by the FCA and CySEC, it complies with all regulations and ensures that its clients’ data security comes first. The company allows to withdraw money 24/7 and keeps traders’ funds across segregated bank accounts.

FAQ

For somebody new to the world of the foreign exchange market, it can seem intimidating at first. However, once you've grasped the basics, trading on forex is actually quite similar to other markets. There are just a few key differences.

As an interbank market,  foreign exchange operates slightly differently to other markets. There is no central exchange and large financial institutions trade with each other to create this market. Because of this, the volumes are huge in comparison to other financial assets, which lowers the overall cost of doing business.

 A pip is merely the smallest increment of trade in the foreign exchange market. It stands for 'percentage in point.' USD/JPY is quoted to two decimal points, so a pip is just the lowest amount that can possibly be added to (or subtracted from) this figure.
 

The simple answer is 'no' – we at Capital.com make money through the bid-ask spread. This is different from traditional trading where a broker would earn commission on every buy and sell that the customer takes part in.

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