Many beginner forex traders often frown upon the Tokyo trading session because of its low trading volume and liquidity levels. However, it can be a gold mine if you know which currencies to trade.
For beginner forex traders, choosing the right currency pairs is just as important as developing a sound trading strategy. In this guide, we explore the top currency pairs to trade during the Tokyo session.
USD/JPY
The USD/JPY currency pair is regarded as the best pair to trade during the Tokyo session. It is one of the most liquid currency pairs, with liquidity levels increasing as Japanese banks and exporters enter the market. The high liquidity reduces the likelihood of erratic price movements.
Moreover, high liquidity leads to lower spreads, which make the USD/JPY pair more cost-effective to trade. The USD/JPY pair also responds quickly to Japanese and US economic news. The pair is also more predictable than many exotic or minor currency pairs, which makes it easier to trade.
EUR/JPY
Although many stakeholders and investors from Europe aren’t active during the Tokyo session, EUR/JPY still experiences noticeable movement. This often occurs because of active trading in the Japanese yen.
Price changes in the EUR/JPY pair are driven by changes in market sentiment, global risk appetite, and Japanese economic data. Now, compared to the USD/JPY, this pair often exhibits larger daily price swings and greater volatility.
While the increased volatility can create attractive profit opportunities, it also increases risk. As a beginner forex trader, you should trade smaller position sizes until you master the pair’s behavior.
AUD/JPY
Which currency pairs are traded at Sydney and Tokyo? The AUD/JPY is one of the most actively traded currency pairs during the Asian trading session. This happens because both Australia and Japan are located within the same regional trading hours.
Of all the currency pairs to trade during the Tokyo session, the AUD/JPY tends to develop clearer trends. As a result, it is attractive for traders on Weltrade who know how to use trend-following strategies.
NZD/JPY
This currency pair also pops up as one of the top currency pairs to trade during the Tokyo session. However, its trading volume is slightly lower than those of other currency pairs mentioned in this article.
According to many experienced traders, NZD/JPY offers opportunities similar to AUD/JPY while often displaying smoother price action. Thanks to its moderate volatility, you shouldn't worry too much about rapid and sudden price fluctuations.
AUD/USD
Although not as popular as the USD/JPY, this pair is still a favorite among many traders during the Tokyo trading session. It also ranks as the most actively traded currency pair because the Australian financial markets are open during this period.
The AUD/USD pair is influenced by movements and news from the Chinese markets, thanks to the close trade ties between Australia and China. The pair offers high liquidity and tighter spreads, with moderate volatility.
Wrapping up
The USD/JPY pair still carries the day as "currency pairs to trade during the Tokyo session." However, other pairs such as AUD/USD, NZD/JPY, and AUD/JPY offer excellent opportunities when Australian or New Zealand economic data is released.
