USD/JPY is the abbreviation for the U.S. dollar and Japanese yen pair for the currencies of the United States and Japan. This cross belongs to the group of ‘Majors’.
In the last 5 years, USD/JPY reached its maximum price of 126¥/USD in June 2015 and a record low of 77¥/USD in September 2012.
The indices that most affect the its moves are the Nikkei 225 (stock market index for the Tokyo Stock Exchange), Topix (the Tokyo Price Index), S&P 500 S&P500 (American stock market index based on the market capitalizations of 500 large companies having common stock listed on the NYSE or NASDAQ), ASX (Australian Securities Exchange) and the MSCI Japan (an exchange-traded fund of Japanese stocks).
WHY USING A CHART TO TRADE THE USD/JPY?
There are two main methods to estimate where a currency is heading: analyzing the economic fundamentals and analyzing the price action through technical analysis. The second are graphical representations of the exchange rates like you see above. Price charts are primarily a graphical display of price information over time. They show supply and demand levels represented through price patterns which can be recognized visually.
In one of his articles, Sam Seiden illustrates the supply and demand principle with an opportunity to buy the USD/JPY: "This market opportunity was to buy the USDJPY at 102.85 with a target of 105.59. In other words, at a “fresh” demand level in the USDJPY. Price had been declining and was nearing the demand zone on the chart. Three weeks later price reached our supply zone, profit target. Another word for demand is “wholesale”. So, when price reached that wholesale level, we want to be an aggressive buyer. Who are you buying from? You’re buying at wholesale levels from people who are trained and comfortable selling at wholesale levels. Why would someone sell at wholesale levels? They obviously don’t understand that proper trading is no different than how the gas station profits on chewing gum. They buy the gum for $0.05 and sell it to us for $1.00. They just keep repeating that simple process over and over. If they sold the gum for $0.05 and bought it for $1.00 two things would happen. First, they would have plenty of very happy customers who love them (the buyers). Second, the gas station would soon be out of business.” - Look at the chart and read the full article
As a numerical sequence, price series can also be technically analyzed using mathematical formulas, represented by technical indicators, for example, with Ichimoku Clouds, a versatile indicator that defines support and resistance, identifies trend direction, gauges momentum and provides trading signals. And Yen pairs love the Ichimoku Cloud! The Ichimoku Kinko Hyo is one of those indicators you should have at least an understanding of because of its originality compared to Western technical indicators. It is advisable to use this tool in the long-term on daily and weekly charts, where it best displays a panoramic view of what is happening with a certain currency pair. Nicole Elliott is one of the most famous and respected expert of this indicator. In a recorded webinar, she provides a step-by-step guide on how to construct and use Ichimoku Cloud charts. Watch the video
HOW TO USE THE CHART - OPTIONS TO CUSTOMIZE
If you click on , you will see the chart full screen with all the options and tools.
Horizontal bar options:
At the top of the USD/JPY chart, you have the following features for you to customize it:
- Save and Load: you can create and save your favorite configurations for future usage. You can also replicate a template from one chart to other one.
- USD/JPY: on this chart, by default, you will see the USD/JPY but you can change it and choose another asset
- Timeframe: from tick-by-tick to yearly
To complete your analysis of the USD/JPY, we recommend you to have a look at the USD/JPY Forecast Poll, an exchange rates heat map of where sentiment and expectations are going.
You can also consider using the FXS Technical Confluences Detector is an in-house tool, developed by FXStreet experts, that allows you to identify those price levels where congestion of indicators like moving averages, Fibonacci levels, Pivot Points occurs. Knowing where these congestion points are located is very helpful as it allows the trader to see these areas of support and resistance easily.
MOST INFLUENTIAL ECONOMIC DATA FOR USD/JPY
The economic indicators that might have the most significant impact on the price of the pair are:
- Fund Rates: in the United States, the Federal funds rate is the interest rate at which depository institutions (banks and credit unions) lend reserve balances to other depository institutions overnight, on an uncollateralized basis. The same rate exists in Japan and is determined by the Bank of Japan (BoJ). When the Federal Reserve increases the federal funds rate, it normally reduces inflationary pressure and works to appreciate the US Dollar.
- Japan CPI: the CPI (Consumer Price Index) is a measure of price movements by the comparison between the retail prices of a representative shopping basket of goods and services. It is one of the most famous indicator of inflation. Japan is notable for inflation, or rather its almost near-absence of it; Japan has actually experienced deflation for much of the last decade. Generally speaking, a high reading of the CPI is seen as positive for the JPY.
- Trade Balance, a balance between exports and imports of total goods and services. A positive value shows trade surplus, while a negative value shows trade deficit. If a steady demand in exchange for US exports is seen, that would turn into a positive growth in the trade balance, and that should be positive for the USD. Japan has large trade surpluses, but very large public debt and an aging population. An important percentage of that debt is held by Japanese investors who seem willing to accept low rates of returns.
- GBP (Gross Domestic Product), the total market value of all final goods and services produced in the US or in Japan in a given year or month. The GDP of a country is a gross measure of market activity because it indicates the pace at which a country's economy is growing or decreasing. Generally speaking, a high reading or a better than expected number is seen as positive for the concerned currency, while a low reading is negative.
- Sentiment indicators:
- Quarterly Tankan survey of business sentiment, the most comprehensive and influential measure of business confidence in Japan. Reported by the Bank of Japan, the Tankan often moves trading in Japanese stock and currency.
- Risk-on risk-off is an investment setting in which price behavior responds to and is driven by changes in investor risk tolerance. Risk-on risk-off refers to changes in investment activity in response to global economic patterns. During periods when risk is perceived as high, investors tend to gravitate toward lower-risk investments. In Forex, the Yen is a currency considered to be a safe haven, that is a currency that serves as a reliable and stable store of value.
- USA CPI:as explained above, the CPI data measures inflation in an economy. When inflation gets too high in the USA, the Fed may increase interest rates in order to ensure price stability. This may cause the US Dollar to rise in value as the additional interest received makes the currency more desirable.
USD/JPY Exchange Rate Chart
Real time USD/JPY chart. It presents a vast range of technical indicators (over 70) as Linear Regression, CCI, ADX and many more. You can detach the chart and see it full screen. And also you could choose over 1000 charts in real-time with Interbank rates (including Commodities and Indices, 22 different time frames and flexible line tools.