The USD/JPY currency pair is one of the most actively traded pairs in the Forex market because of its high liquidity. The Yen, which is known as a safe-haven currency, has proven to be a reliable reserve currency since the financial crisis in 2008. Traders also see the Yen as a good substitute to currencies which seem to be tougher to trade.
When to trade USD/JPY?
The Forex market functions 24 hours a day but there are best and worst time periods you need to consider when trading the USD/JPY pair.
Traders should look to make a move when the market activity is at its highest, which is generally between 12:00-15:00 GMT. This period offers traders tight spreads and high liquidity. Meanwhile, it’s best to avoid the 3:00-5:00 GMT timing window when the Tokyo trading session nears its end and both the London and New York sessions have yet to open. Another quiet period to avoid is between 21:00-24:00 GMT, when the New York market has just closed, and London and Tokyo markets are asleep.
Market factors that affect USD/JPY
There are market factors that you need to keep your eyes on when trading the USD/JPY pair. One major factor that you need to closely monitor is Japan’s interest rate. Historically, the Bank of Japan has maintained a consistently low-interest rate, making Yen a popular choice for traders. Economic factors such as gross domestic product or GDP, CPI, and wage growth also affect the USD/JPY pair. Furthermore, look out for economic events in the Asian markets like China, Singapore, and South Korea.
Bottomline
The USD/JPY pair is a good choice for traders looking to enhance profits mainly because the pair offers greater stability and liquidity than other currency pairs. But that alone won’t guarantee you success. You have to be able to choose the right timing window, as well as determine market triggers, for better profit potential
