The USD/JPY is the second most traded currency pairs among the majors. The pair indicates the number of Japanese yen required to buy a U.S. dollar.
USD/JPY Binary Options TradingIn this currency pair, the Yen is the quote currency while the U.S. dollar is the base currency. For example if the USD/JPY is trading at 1.60 it means that 1.60 Yen are required to buy a single U.S. dollar. The USD/JPY pair is commonly known as the ‘gopher’ in the world of forex trading.
Why trade the USD/JPY Currency Pair
· Attractive liquidity
The USD/JPY is one of the most liquid currencies. The bid-ask spread is also low, making it an attractive pair for beginner traders as well as experienced traders.
· All-round trading
U.S. based traders can continue to trade the USD/JPY pair even at night because the Yen experiences high trade volumes at night (which is usually the day business hours in Asia).
· Risk reduction
The USD/JPY currency pair is effective at lowering risk due to the wide trading scope it offers. This way, a trader is able to gain from market fluctuations.
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Type of available binary options for the USD/JPY Currency Pair
Basic Call/Put options: Predict if the exchange rate for USD/JPY will move up or down before the expiry time.
Touch options: Predict whether the exchange rate for USD/JPY will touch the given strike price before the expiration time.
In/Out: Predict whether the exchange rate for USD/JPY will stay within a range of two strike prices.
Possible signals for the USD/JPY Currency Pair
· On July 6 2015, the USD/JPY pair traded lower at 122.67 to fill up the bearish gap experienced overnight. The USD bulls recovered back to the bids and lifted the USD/JPY pair from a six-week low. The pair is now recovering and gaining strength as fears of a Greek exit from the EU are alleviated and traders are no longer attracted to the Yen as a safe-haven.
· The USD/JPY currency pair is currently being affected by short-term market swings, which have seen the exchange price swing between a supply level of 124.00 and a demand level of 122.00.
· On July 3 2015, the USD continued to trade sideways in a choppy market above the 122.00 level against the Yen. Closing at the 50% Fibonacci retracement at 122.36 exposed a resistance level at the 61.8% level. The prices were too low to enable trading from a risk/reward perspective.
Factors Influencing Price of the USD/JPY Currency Pair
Interest rate differences- The difference between interest rates issued by the Bank of Japan and the Federal Reserve will affect the exchange value of the pair. The value of the USD/JPY could increase if the Fed intervenes to make the dollar stronger.
Relation with other pairs- Given that the USD/CAD and USD/CHF currency pairs have the U.S. dollar as the base currency, their exchange value or movement impacts the USD/JPY.
Strength of U.S. dollar- Factors such as jobless claims, inflation and non-farm payroll in the U.S. affect the strength of the dollar. The dollar’s strength or weakness will have a direct impact on the USD/JPY exchange rate.
Intervention by Japanese government- In an effort to strengthen the Yen especially at a time of economic upheaval, the Japanese government may intervene in the economy, a move that could weaken the exchange value of the USD/JPY pair.
Oil price increases- Japan is a major oil consumer but it does not produce any oil at all. This makes the country’s economy vulnerable to oil price fluctuations. An increase or reduction in oil prices may influence the USD/JPY currency pair.