How USD JPY Trading Strategy Works and Key Tips for Success
Mar 21 2025
US dollar / Japanese yen (USD/JPY) is a major forex currency pair comprising the United States and Japan's national currencies. USD/JPY is popular with traders due to its volatility, high liquidity, and global importance.
Trading major currency pairs can incur high fees, so using the right broker is crucial. STIC Cashback has partnered with leading platforms to offer rewards to new registrants, which is ideal for offsetting fees. Ready to learn USD/JPY trading strategy? Let's dive deeper.
Overview of USD/JPY
The USD/JPY trading pair accounts for 13.34% of the forex market's volume, making it the second most traded currency pair. The US and Japan have strong positions on the global stage, and their economies significantly influence the USD/JPY pair's value.
The USD/JPY pair is popular as it provides many trading opportunities due to its frequent volatility, while large USD JPY positions can also be taken without affecting price due to its liquidity.
Key Influences on USD/JPY Movements
Many factors influence the USD to JPY exchange rate. Everything from inflation to geopolitical tensions and today's USD JPY news stories play a direct and substantial role in its valuation. Some of the most significant considerations for people trading USD/JPY include:
Interest Rates
Demand for a currency is tied to interest rates as holding becomes more worthwhile when you earn a higher yield for doing so.
The Bank of Japan (BoJ) rarely increases interest rates, so when the US Federal Reserve does, it becomes more worthwhile to hold US assets as their yield increases, making USD more attractive, boosting demand, and increasing JPY to USD exchange rates.
Macroeconomic Indicators
When one nation's economy outpaces the other, the USD JPY chart will show a clear price movement.
Macroeconomic Indicators like Gross Domestic Product (GDP) growth, inflation rates, and employment statistics are used to characterise the strength of a nation's economy and, therefore, hold substantial influence over price.
Geopolitical Events
The yen is seen as a safe-haven currency due to its consistent inflation, low interest rate, and predictability. However, things like sanctions, health crises, and war are examples geopolitical events could upset the nation's stability, lower confidence in the yen, and can cause it to lose value.
Market Sentiment
Another way people can work out the USD JPY forecast today and determine whether to buy or sell is to analyse market sentiment and risk appetite.
For example, safe-haven currencies typically drop when investors can take more risk during bullish markets. Likewise, when the market is optimistic about a currency, say it beat economic expectations, traders tend to rally toward it, boosting its value.
Benefits and Challenges of Trading USD/JPY
Trading major forex pairs like USD/JPY comes with a particular set of benefits and challenges. We've curated a list of some of the most essential to learn about before making your first trade.
Benefits
Some benefits of trading USD/JPY include:
- High liquidity: There is a lot of money in the USD/JPY market, so spreads are tight and efficient.
- Data availability: As a major pair, there is plenty of data for performing analysis and backtesting strategies.
- Trade maturity: The pair experiences quick and extended price movements, making it suitable for long and short-term trades.
Challenges
Some difficulties of trading USD/JPY include:
- Geopolitical sensitivity: The pair is susceptible to sudden, unexpected movements due to geopolitical events and central bank announcements.
- Volatility potential: With both countries frequently trading forex, the Asian/North American sessions experience high volatility, increasing trade risk.
Best Time to Trade USD JPY in South Africa
The best time to trade USD JPY in South Africa is when two of the primary forex trading sessions overlap. These periods offer the most activity and liquidity. However, large movements can also be expected during key announcements, like interest rate changes.
An overlap between the Tokyo and New York Sessions doesn't exist, so the overlap between the European and New York sessions is best. It occurs from 3:00 to 7:00 pm South African Standard Time (SAST).
Strategies for Trading USD/JPY
Sticking to a strategy can produce USD JPY trading signals, help improve win rates, and assist in mitigating losses. Here are some popular forex trading strategies:
- Carry trading: Traders can borrow money in a low-interest currency like the yen to invest in higher-yield USD assets, profiting off interest spread (the difference between interest rates).
- Technical analysis: Some people review price/volume data and use technical indicators like moving averages or the Relative Strength Index (RSI) to predict trends, determine optimal entry/exit prices, and produce forex signals.
- Fundamental analysis: Economic data releases, banking policy, trade statistics and other factors are analysed by traders to help them understand how a currency pair might perform.
A simple trading plan involving USD JPY fundamental analysis would be purchasing USD/JPY when the US economy is struggling (shown by high levels of unemployment) and selling when it recovers and shows promise (signalled by high disposable income).
How STIC Cashback Can Support USD/JPY Traders
Beginners learning how to trade forex will find that trading fees quickly add up and eat into profits. As such, selecting a solid broker is paramount. However, the process can be time-consuming.
STIC Cashback has partnered with 16 brokers offering tight spreads, many forex pairs, and a range of trading tools to make choosing simpler. Moreover, users can earn rewards for registering via STIC Cashback's promotions, which can be used to offset fee costs and make trading more affordable.
USD JPY Trading Strategy FAQs
How Can I Analyse a USD Yen Chart?
Technical analysis is used to analyse price charts. A basic method involves looking for support/resistance levels and placing a trade when prices break above/below and show a confirmation.
Why Is the Yen So Weak?
Japan is in an economic slump, which has led the yen into a downtrend. The Bank of Japan struggles to stimulate spending, and investors have been swapping yen for USD to earn a yield on their money.
How Do I Trade USD JPY?
People must register for a broker, deposit funds, search for USD/JPY, and decide whether to buy or sell. Checking for a USD JPY forecast to determine its potential direction before trading is also helpful.