Beginner’s Guide for Trading USDJPY – As one of the most popular currency pairs on the forex market, the USD/JPY is a versatile, high volume currency with many unique traits.
USD/JPY, known as the Gopher, Beginner’s Guide for Trading USDJPY has a tendency to move based on the relationship between the United States and Asian economies; consequently, there are some fairly reliable predictors that can be used on the market. When either economy is in a period of flux, beginners will need to be cautious when trading USD/JPY. Though the profit potential is significant, USD/JPY can also be very volatile…
Market volume and trader popularity
Beginner’s Guide for Trading USDJPY
USD/JPY has exceptionally high market volume. It’s based on two of the largest and most active currencies in the world- trading usdjpy. Because of it’s popularity, it is also supported by virtually all markets and brokers. It’s easy to find trading tips and forex signals for this currency pair.
Significant opportunity for profit
USD/JPY has long periods of stability along with volatility, and this creates potential for forex traders. Volatility within this currency pair is often driven by Asian market forces, making USD/JPY a gateway currency into the east.
Traders often focus on USD/JPY not only because of its popularity on the market but also because of its exceptionally low spreads. The popularity of the currency means that the fees associated with trading it are fairly low, and this opens up the possibility of greater profit. USD/JPY may also be used for more rapid fire trading techniques, because the high liquidity means that trades go quickly and cheaply.
Trading patterns and predictability
The USD/JPY market is also very associated with commodities trading in Japan, which makes it easier for the currency to be predicted. Traders can look at the current global market for exports and imports in order to identify potential trading strategies. This makes the pair uniquely easy to research.
On the other and, USD/JPY can also be a challenge because it can be unpredictable and volatile; the closed economy means that the Yen can fluctuate rapidly based on new developments, trading usdjpy .
As an example, when a natural disaster has hit Japan, the economic devastation is fast and decisive. Thus, there is a component of risk in trading USD/JPY.
The Primary Influences on the USD/JPY
USD/JPY functions in relation to the economies of the United States and Japan in relation to each other — and to a lesser extent how the United States and Asian economies are doing in relation to each other. Thus, the primary influences on USD/JPY will always be their respective economies. In times of economic turmoil in the United States, the Yen will rise; in times of economic turmoil in Japan, the dollar will rise. Both of these countries have economies significant enough that they are generally not influenced by market trading, they are usually only influenced by large global and economic events.
Japan’s import/export balance
USD/JPY tends to tilt towards the United States Dollar when Japan begins importing more than it is exporting, because Japan’s economy becomes weaker when it is purchasing more goods than it is selling. Consequently – trading usdjpy – some analysis based on commodities trading can often help with the foreign exchange market.
Japan is also a major exporter, so its trading relations will always matter in terms of USD/JPY growth. Trading relations can change within the Asian countries, especially with China which is both a major importer and exporter in the region.
Japan’s vulnerability to national disaster
Japan also tends to be uniquely affected in terms of its country’s economy based on national disasters, because of the size of its country. The United States as a whole isn’t generally affected by natural disasters as far as its economy goes.
The Yen’s slow growth and the Dollar’s pace
One thing that should be noted about USD/JPY is that the Yen grows very slowly. In general, the US economy significantly outpaces the Japanese economy, because the Japanese economy has gone through a period of stagnation. Because Japan is likely to continue this trend, the currency price of the Yen has been trending downwards in relation to USD for some time.
Japanese government intervention
Japan is currently working steadily on its economy and is trying many different initiatives in order to improve upon it. Because of this, traders need to watch the actions of the Japanese government if they want to invest in the market. New initiatives that the Japanese government takes in order to improve upon the economy could significantly alter the course of the currency. This includes adjustments of national interest rates, which are presently extremely low.
Overall: reliably tracking the USD/JPY requires an in-depth understanding of Japan’s currency influences in particular; the influence is on tracking Japan’s growth and stagnation rather than tracking the economic position of the United States.
USD/JPY Trading Patterns
Apart from the fundamental analysis of the USD/JPY based on commodities and economies, other standard trading patterns do apply.
Because USD/JPY is usually fairly stable, the trading patterns that are often used are breakaway patterns.
Breakaway patterns are when the market suddenly undergoes a sudden fluctuation in either direction. The market may have sharply gone up or down. A breakaway pattern is set for any amount that the trader believes is significant.
For instance, some traders may believe that a breakaway is at 20 pips or other traders may think a breakaway is at 40 pips.
Once the breakaway is hit, a trader will be able to initiate a trade in that direction, under the assumption that the currency will continue rising or falling.
Support and resistance patterns
Other traders commonly look at support and resistance values in an effort to catch the market as it is stabilizing. Support and resistance values are prices at which the currency pair usually does not go under or over.
A support price would be a price that USD/JPY does not normally go below; if the currency does go below this, the trader may then assume the currency will then go back up. A resistance price is a price that a pair may not normally go above, and if the currency does go above this, the trader may assume the currency is going to go down again.
Support and resistance trading can be very useful for trading USD/JPY because the currency pair is generally stable despite some occasional volatility. Support and resistance trading can also be utilized during times of economic distress with the assumption that the price will return to normal later, though this may be a long view for a trader to take.
The USD/JPY has a significant amount of historical information to take into consideration when trying to determine trading strategies.
The fundamental analysis on USD/JPY can include everything from economic forecasts to predicted natural events. The USD and JPY currencies both have strong and varied economies that can be pulled from to create trading strategies and identify any potential changes in price. The Japanese economy as a whole has slowed and has started to suffer, which can be an opportunity for traders looking to conduct long-term trading based on growth. USD/JPY fundamental analysis may also include the Asian market.
Issues that affect the Asian market as a whole — including China and Korea — will often alter USD/JPY as well, though to a lesser extent than in-country issues. Thus, fundamental analysis that includes the Asian market may provide a broader picture and may be able to support fundamental analysis. Other traditional technical analysis can often be used to great effect on USD/JPY because of its general stability and liquidity.
Start Trading USD/JPY
Are a beginner trader who wants to get into the foreign exchange market with USD/JPY? If so, you may want to first start out by using forex trading signals.
Signals give you all the information you need to initiate trades without having to conduct your own research — analysis is done on your behalf by experts. They are one of the best ways for beginners to get started with a new currency and learn more about the market.