How to Trade AUD/JPY

Amidst global banking sector turmoil, the AUD/JPY rate dipped to its lowest point near 86.50 in March 2023. Subsequently, it peaked around 98.50 in November before stabilizing at 98.62 (as of April 2024).

**Past performance is not a reliable indicator of future performance.

Let’s discuss how to trade AUD/JPY in detail. 

What is AUD/JPY?

AUD/JPY is the currency pair representing the exchange rate between the sixth most-traded currency in the world, the Australian Dollar (AUD), and the third most-traded currency in the world, the Japanese Yen (JPY). It indicates how many Japanese Yen are needed to purchase one Australian Dollar. 

When is the ideal time to trade AUD/JPY?

The ideal time to trade is during overlapping trading hours when markets are open. Overlaps lead to wider price ranges, creating more opportunities. Take a closer look at overlapped hours. 

Australian and Japanese market overlap (00:00 and 08:00 GMT)

The best time to trade AUD/JPY is typically during the overlapping trading hours of the Australian and Japanese markets, which occur between 00:00 and 08:00 GMT. The period tends to see increased liquidity and volatility, offering more trading opportunities for traders interested in this currency pair. Economic releases and news events from Australia and Japan during this time period can significantly impact the AUD/JPY exchange rate. 

Asian and European market overlap (00:00 - 04:00 GMT)

As the Asian session winds down and the European session begins, there is an overlap in trading hours that can present opportunities for AUD/JPY traders. During this period, traders in Asia are closing their positions while traders in Europe are starting their day. The transition often leads to increased trading volume and volatility as market participants adjust their positions based on developments from both regions. During this overlap, traders monitoring the AUD/JPY pair may encounter significant price movements influenced by economic data releases and news events.

Australian and New York market overlap (06:00 - 08:00 GMT)

The overlap between the Australian market and the opening of the New York session is another suitable time for trading the AUD/JPY pair. When the Australian market reaches its peak activity, traders in New York begin their trading day, resulting in increased trading volume and volatility for the pair. This overlap allows traders to react to developments from both regions, such as data releases and other events, which can impact the AUD/JPY exchange rate. Traders often find favorable trading conditions during this period, with opportunities to capitalize on short-term price movements.

Asian and European market overlap (06:00 - 08:00 GMT)

During the final hours of the Asian session and the early hours of the European session, there is an overlap in trading hours that can be advantageous for AUD/JPY traders. As traders in Asia wrap up their day and traders in Europe begin theirs, there is often a surge in trading activity and volatility. This overlap allows traders to exploit significant price swings influenced by economic data releases, central bank announcements, and other events. Traders monitoring the AUD/JPY pair may find favorable trading conditions and ample opportunities to execute gaining trades.

Top AUD/ JPY trading strategies

Economic calendar trading

Traders monitor economic calendars for key releases from Australia and Japan, such as GDP, employment data, and central bank announcements. They analyze the impact of these releases on the AUD/JPY exchange rate and place trades based on the expected outcomes and market reactions.

Breakout trading

Breakout traders look for significant price movements above or below key support and resistance levels. When the AUD/JPY pair breaks out of a trading range, traders enter positions in the direction of the breakout, aiming to gain from sustained momentum and vice versa.

Wednesday AUD/JPY trading

Some traders focus specifically on trading the AUD/JPY pair on Wednesdays, utilizing patterns and trends observed on this particular day. Traders focus on trading AUD/JPY on Wednesdays due to tripled rollover rates resulting from interest settlements from Sunday and Saturday. It presents an opportunity for potentially increased gains or adjustments in trading strategies on the specific day of Wednesday. 

This strategy may involve analyzing historical price data to identify recurring patterns or behaviors unique to Wednesdays and implementing trading strategies accordingly.

Range trading

Range traders identify periods of consolidation or sideways movement in the AUD/JPY pair and aim to gain from the price oscillating between support and resistance levels. They enter a long trade near support and short near resistance, exiting positions as the price approaches the opposite boundary of the range.

Correlation trading

Traders employing correlation trading analyze the relationship between the AUD/JPY pair and specific commodities, such as gold or copper. They identify correlations and divergences between commodity prices and the AUD/JPY exchange rate. They use this information to inform trading decisions and hedge against risk by adjusting positions in the currency pair or the commodity. 

Commodities like gold and copper can be used for correlation trading because they are related to AUD/JPY due to Australia's significant role as a producer and exporter. As commodity prices often correlate with the strength of the Australian economy, positive movements in these commodity prices can positively influence the Australian Dollar (AUD) value against JPY and vice versa.

Asian session scalping

Scalping during the Asian trading session for AUD/JPY is advantageous due to increased liquidity and volatility. Traders capitalize on quick price movements during this time, making multiple small trades to exploit short-term fluctuations in the AUD/JPY pair, facilitated by the active market conditions characteristic of the Asian session.

Tips to trade AUD/JPY

• Monitor commodity prices: Stay updated on iron ore and gold prices as they heavily influence the AUD, impacting AUD/JPY rates.
• Be mindful of the Asian time zone: Asian trading sessions often see increased AUD/JPY volatility, requiring careful timing of trades for optimal results.
• Consider carry trade strategies: Explore borrowing in low-interest JPY to invest in high-interest AUD, leveraging interest rate differentials for potential gains.
• Pay attention to trade balance reports: Keep tabs on trade balance reports from Australia and Japan, as they can reveal economic health and affect currency values.
• Track interest rate differentials: Monitor RBA and BoJ monetary policies and interest rate changes to anticipate AUD/JPY fluctuations based on interest rate differentials.

Balance AUD/JPY trading opportunities with risks

Trading AUD/JPY presents opportunities for traders seeking exposure to currency pairs influenced by commodity prices, Asian market volatility, interest rate differentials, and more. However, there are risks to trading the pair, such as commodity market fluctuations, geopolitical tensions in Asia, and shifts in interest rate policies between Australia and Japan.