Since the economic crisis of 2008, Japan’s yen has been generally viewed as a dedicated reserve currency. Once thought the planet’s third-largest safe sanctuary currency due to its high liquidity and lower bid-ask spreads, USD/JPY has been favoured by both professional traders and novices. 

The pairing has even played an essential role in trading activity throughout Asian needs since the yen was frequently purchased or sold as a substitute for more surprising currencies in the area.

Nevertheless, the value of the yen hit a brief 24-year low earlier this year as inflation drowned in numerous worldwide thrifts, war ranted on in Ukraine, and stocks fell across the world, going many wonders if the yen’s secure haven days are something of the history. The Japanese currency’s worth has fallen around 11% in 2022 against the rising dollar, which means that traders should comprehend how inflation can affect USD/JPY trading and how Japan’s main banking method and monetary policies can affect the yen. 

The USD persists to hold steady after the U.S. Census Bureau said that retail sales stayed flat month-over-month in July, missing assessments for a small 0.1% increase following incredible sales growth in June. 

Automobile and parts sales also declined approx. 1.6% in July after rising by approx. 0.5% during the previous month. Control group sales increased about 0.8% from June to July, despite market anticipations predicting just a 0about .6% upgrade.

Because JPY is the top reserve money in the Asian markets, its high liquidity was often viewed as useful to traders looking to capitalize on market activity in countries whose currencies would otherwise be tougher to exchange—particularly at a large volume. That’s why traders or Forex Broker should study current market elements that can affect the yen’s price trends.

Benefits and Drawbacks of Trading USD/JPY

One of the greatest benefits of USD/JPY is its high day-to-day liquidity, which makes volatility that generates regular trading options. Because USD/JPY is strongly correlated to the Japanese things market, the price swings made by the pair’s liquidity make these price trends more straightforward to predict than those of other currency pairs.

USD/JPY also features lower bid-ask spreads, compared to other major currency pairs. These low spreads enable trading and improve your potential profits. But there are also disadvantages to thinking when setting a trade, starting with the volatility of this pairing. Corresponded to other major currency pairs, the volatility of USD/JPY stops it from working as a safe-haven pairing. Although profit options can be regularly seen, this volatility can also guide you to fast, substantial failures if you aren’t paying attention to the news cycle.

USD/JPY is heavily influenced by the news cycles in both the United States of America and Japan, so traders targeting this pair will require to stay on top of economic news from both nations if they like to flexible leverage the volatility without evolving victims.

Forex Broker or Forex Trader has a fair idea about the market, but we should always keep the above pros and cons in mind.