EURJPY is a currency pair where the currencies of the Eurozone and Japan meet, and as a currency pair is not influenced by the geopolitical factors impacting the US dollar. Most US dollar crosses are hard to trade in the medium term, and especially hard if one believes the economic analysts too much. This is because economic analysts fail to assess geopolitics right, and the US dollar surprises them with an unexpected big move.
This means that if you are a fundamental analyst who is struggling to predict the US dollar, you stand a much better chance predicting the EURJPY pair, because it is much more tied to old school economics than anything else.
EURJPY is good to use as part of your portfolio, as a non US cross pair, for trading at time when other pairs seem too confusing. In fact, traders should separate their preferred currency pairs in US and non US crosses, and further more in terms of confusion. So as to be able to trade away from US dollar effects when necessary, and also to turn from one currency pair to another when the first currency pair goes through a confusing trading period.
How to Trade EURJPY
EURJPY can be traded in many ways, it tends to trade smoothly, more smoothly than US dollar crosses, and it tends to have large range days. In terms of daily range, it exceeds EURUSD, so traders use simple tools such as daily LSS pivot numbers to anticipate likely support and resistance levels during the day, or simply the levels where momentum will change.
EURJPY daily chart – this market tends to work well with chart patterns such as flags, channels, and symmetry. You can see how the first leg of a rally is followed by consolidation, and then by another leg of similar magnitude. Patterns of symmetry appear all over EURJPY charts, in many time frames.
Other indicators such as moving averages can be used on EURJPY, they don’t work perfectly, but still do work better than they do on EURUSD. You can trade EURJPY using LSS daily and weekly pivots, few moving averages, and possibly one more indicator. But price patterns and LSS will be more than enough to identify turning points on the daily chart.
EURJPY can also be used in scalping strategies or semi-scalping strategies during the New York trading time zone, this is because both the Euro and the Yen are least active during these times, therefore the probability of a breakout is reduced. And yet the tiny fluctuations of EURJPY are actually quite big, even during quiet hours, and this can be fully exploited by knowledgeable scalpers.
You can further enhance a day trading strategy on EURJPY, especially a momentum based day trading strategy by gaining access to an ECN forex broker, and watching how spreads behave when the market is testing the daily support or resistance, as defined by those LSS pivot numbers. If the market is moving too far, and the spreads of the ECN broker widen too much for EURJPY, it means that liquidity is drying up, and there’s a good chance the market will not continue in the direction of that breakout. But if the spreads return back to normal after a while, and marker price remains at the extreme level, still testing the pivot, there’s a good chance that the said breakout will turn out to be a valid one.
The widening of the spreads effect can be used on all currency pairs, but with pairs such as EURJPY there are some proven benefits, that of huge daily range and that of stronger adherence to the LSS pivots.
In terms of volatility, EURJPY is simpler than EURUSD, you can expect to see false signals and the market turning in the opposite direction (when it’s least expected), but there is more momentum and more prolonged moves, as if there is less noise in EURJPY, compared to EURUSD. In that regard EURJPY is not suitable for advanced volatility trading as the EURUSD could be, but for just about everything else, day trading, scalping, and reliable chart patterns, EURJPY works great.