EUR-JPY Trading

EURJPY is the ticker symbol for the euro and Japanese yen exchange rate. By combining the popular EUR and the volatile JPY, the EUR JPY has become a favourite currency pair of many forex traders. The pair is also referred to as ‘Euppy’, pronounced as ‘Yuppy,’ and is currently, as of October 2019, the seventh most traded asset in the forex market. The EUR-JPY is a ‘cross pair’, and it falls under the ‘minors’ group in the forex market. In the EUR JPY forex rate, the EUR is the base currency, while the JPY is the quote currency. This means that at any given time, the price of the EURJPY represents the number of Japanese yen it would take to exchange for one euro.

History of the EUR-JPY Trading pair

Only introduced in 1999, the euro is truly a modern currency and serves as the official currency of the European Union, the largest economic region in the world. Its introduction realised an age-old ambition of forming a common currency that would stabilise the European economy, give consumers more freedom and promoting overall monetary cooperation. Still, in its short life, the euro has had its fair share of political and economic challenges. But it has risen to become the second most traded currency in the world, just behind the US dollar (USD), and remains as such, as of October 2019.

It faced its first major test in 2008 when the Eurozone entered a recession. There would be further threats after this as major member states, such as Greece, Italy and Spain who faced complex debt crises and piled even more pressure on the common currency. The Japanese yen is the third most traded currency in the world, as of October 2019, and unlike the euro, it has printed some mileage. It was first adopted by the Mejji government in 1871 and has survived through two World Wars, with Japan’s advanced industrial base propelling the yen to global prominence. As a major export nation, Japan has seen some government interference on the yen; the most notable one being the 2012 devaluation which was kick-started by Prime Minister Shinzo Abe that was termed ‘Abenomics’ within financial circles.

EUR JPY Price History

Since its introduction, the EUR-JPY has seen considerable volatility and massive trends. The pair printed its all-time low of circa 90.00 in October 2000. It then started a multi-year uptrend that saw it attain an all-time high of 169.78 in July 2008. The 2008 Great Recession piled pressure on the pair, which quickly tumbled to circa 115.00 by February 2009. The yen continued to strengthen, dragging the EURJPY price to a low of circa 95.00 by July 2012. Then ‘Abenomics’ kicked in! The EUR JPY quickly climbed to circa 120.00 by January 2013, with the uptrend overextending to circa 150.00 by December 2014. Since then, up until late 2019, the pair has traded between 110.00 and 140.00.

Why Trade EURJPY

• Volatility
  The EURJPY pair has always displayed decent volatility in most trading sessions. This ensures that traders can find multiple trading opportunities when trading the pair.
• Low Spreads
  Most Japanese crosses usually have relatively higher spreads. But the EUR JPY is always available at low, competitive spreads, which effectively lowers your overall trading costs.
• Stock Indicator
  The EUR\JPY is considered a leading indicator for stocks globally. The correlation has always proved to be effective, with the pair rising when stocks are trending higher, and the risk is on. In a risk-off environment, the EUR JPY will generally fall and signal tumbling stock prices.

Major Bodies Influencing EUR-JPY

• Bank of Japan
  The Bank of Japan (BoJ) is the biggest influence on the Japanese yen. Watch out for the monthly interest rates announcements, as well as its involvement in the bond market. In recent years, Japan has implemented the most aggressive Quantitative Easing program in the world, which has resulted in a weaker yen overall.
• European Central Bank
  The European Central Bank (ECB) also releases rates and the accompanying rate statement monthly. ECB is also an active player in the market, and has, as well, implemented periodic Quantitative Easing when the Eurozone has shown signs of slowdown. The ECB also makes major decisions on individual member states, such as borrowing or strategic stimulus packages, which may have an impact on the euro and consequently, the EURJPY rate. 
• Japan Statistics Bureau
  The JPY is a news sensitive currency, which makes it important for EUR JPY traders to track major data releases by the Japan Statistics Bureau. Important news to watch out for include Trade Balance numbers, GDP figures and the Consumer Price Index. 
• Japan Meteorological Agency
  Japan is prone to natural disasters that can shatter major sectors of its economy. It is prudent to particularly track severe earthquake warnings delivered by the Earthquake Early Warning (EEW) system because they can pressure the JPY lower.

EUR JPY Correlations

The EURJPY has a positive correlation with the CHFJPY, EURUSD and USDJPY. A positive correlation implies that the EUR-JPY will tend to mirror similar price movements with the correlated assets. It also has a negative correlation with the USDCHF; which means that when the EUR JPY rises, the USDCHF will tend to fall, and vice versa. 

EUR-JPY FAQ

• How can I trade the EUR/JPY?

  Trading this pairing is not too different from other pairings. You need to look for the times when liquidity and volatility are high, and you can also focus on economic reports that could influence trade between Japan and Europe. One easy way to trade the EUR/JPY is through CFDs, or contracts for difference. Trading this way avoids taking possession of either currency, and it also allows a trader to use greater leverage when trading. Traders prefer to use technical analysis when approaching this pair, looking for areas of support and resistance or important moving average crosses.

   
• What’s the best time to trade the EUR/JPY?

  The first thing you’ll need to do when trading the EUR/JPY is find out when the best trading hours are. In this case the pair tends to have the greatest liquidity between 13:00 and 16:00 GMT. This is when the New York and London sessions overlap. Traders can take advantage of this liquidity since it yields tighter spreads and larger price moves. The trading conditions can be even better on days when there is major economic news reported in the European afternoon, or at the market open in the U.S.

   
• What’s a good strategy for trading the EUR/JPY?

  The first thing you’ll need to do is check to see if it’s the right time to trade the EUR/JPY. Because the pair is a cross created from a combination of EUR/USD and USD/JPY you need to check these two pairs. If they are both trending in the same direction it is a good time to trade EUR/JPY. The best setups are when both EUR/USD and USD/JPY are rallying off support (buy) or falling off resistance (sell). To complete the trade be sure to implement a smart stop loss, and know where your take profit target is.