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AUD/JPY Forex Pair Trading Guide

Date Modified: 19/05/2024

In addition to the most popular Forex pairs like the EUR/USD (EURUSD), or the GBP/USD (GBPUSD), traders may also be interested in minor currency pairs like the AUD/JPY (AUDJPY) which are less traded Forex pairs that exclude the American Dollar (USD).

In this Forex trading guide, we'll focus on the AUD/JPY currency pair, which represents the evolution of the exchange rate between the Australian Dollar (AUD) and the Japanese Yen (JPY).

An illustration of the AUDJPY forex pair

AUD/JPY: Unveiling the Relationship Between Australia and Japan

Australia's mining industry is a global powerhouse that has been a key driver of the country's development since the gold rush. In the last few decades, Australia's mineral boom has been supported by high demand for primary commodities in countries like China and India.

The country boasts a leading position in producing and exporting a vast range of commodities, ranking among the top 5 for resources such as iron ore, zinc, lithium, bauxite, wool, cotton (CT), lead, beef, sugar (SB), lentils, black and brown coal, gold (XAU), manganese, nickel, aluminium (ALI), uranium, silver (XAG), diamonds, and copper (HG).

As of 2024, natural resources represent more than 60% of the Australian export share and more than 17% head to Japan, Australia's second-largest exporting partner, after China. Moreover, more than 40% of the country's exports go to Japan, Korea, India, the United States, Taiwan and Singapore.

Australia's biggest imports are refined petroleum, motor vehicles, freight, and telecom equipment & parts.

Japan is one of the biggest high-tech powerhouses in the Asian region and the fourth biggest economy in the world, having lost 3rd place to Germany in February 2024.

The country heavily relies on its exports (motor vehicles, electronic integrated circuits, and semiconductors among others), while also having to import many energy commodities like oil (CL), gas (NG), and coal, for instance.

Japan's top export destinations are China, the United States, South Korea, Hong Kong, and Thailand. For imports, China is usually the leader, followed by the United States, Australia, the United Arab Emirates, and Saudi Arabia.

What Is AUD/JPY Trading?

In the AUD/JPY currency pair, the AUD is the base currency and the JPY is the quoted currency. Therefore, if the AUD/JPY exchange rate is 99, it means you need 1 AUD to buy 99 JPY.

Moreover, AUD/JPY trading involves trading the exchange rate between the Australian Dollar and the Japanese Yen to profit from the evolution of the currency pair value.

How to Trade the AUD/JPY

You can either do this by opening a long position (buying the AUD/JPY pair), if you anticipate a potential rise of the AUD/JPY, or a short trade (short-selling the Forex pair) if you expect a fall of the AUD/JPY. This decision will depend on your analysis and whether you believe the currency pair will appreciate or depreciate (bull vs bear market).

Factors Influencing the Value of the AUD/JPY Currency Pair

Here's a list of the key events and factors to consider when trading the AUD/JPY as they usually move the market:

  • Central banks’ decisions on monetary policies like interest rates, open market operations, reserve requirements, and hawkish or dovish guidance from the Reserve Bank of Australia, or RBA, and from the Bank of Japan or BoJ.
  • Fiscal policies in Australia and Japan (mostly taxes and spending).
  • Macroeconomic data like CPI, inflation, employment, consumer confidence and growth figures like GDP, CCI, and PMI.
  • Global economic conditions like recession, recovery, and economic expansion.
  • Geopolitical events like trade wars, and elections. In addition, punishments in response to conflicts, like sanctions against Russia, should also be taken into consideration.
  • Natural disasters because of both islands’ geographical locations and geological features. Japan is likely to experience earthquakes, tsunamis and cyclones, while Australia could face bushfires, floods and droughts.
  • Unexpected events, such as wars, strikes, and epidemics.
  • Commodity prices. As Australia is a major exporter of various commodities, when their prices increase, then it strengthens the Australian economy. Because Japan is an important importer of different resources, especially natural resources like energy, then when prices rise, these resources become more expensive for the country.
  • Traders' risk sentiment, market psychology and speculation could influence the buying and selling interest and pressure on the currency pair, which usually tends to impact the value of the AUD and JPY.
  • Carry trades. Because of low interest rates in Japan, the Japanese currency is often used in strategies including a carry trade. Depending on the evolution of the rate differential between both countries, currency carry trade strategies can have an influence on the AUD/JPY.

Explore how these factors influence the Forex market in our guide titled “What Events Impact Forex Trading?

AUD/JPY Analysis Made Easy: Tools for Your Trading Journey

AUD/JPY traders have a diverse toolbox of analytical methods at their disposal. Whether you focus on technical analysis through charts, track economic data releases, or gauge market sentiment, various tools can help you decide to make your buy or sell decisions. Combining technical analysis and fundamental analysis are among the different ways to analyse the AUD/JPY.

Technical analysis with AUD/JPY is all about analysing its historical and current prices in an attempt to forecast possible future movements. For that, Forex traders can use basic Forex trading indicators (such as Moving Averages (MA), Relative Strength Index (RSI), and Bollinger Bands (BB)), chart patterns (such as head-and-shoulder, double bottom, and hanging man), key price levels (such as support and resistance levels, trend lines, channels, and Fibonacci retracements), as well as Forex trading alerts.

Fundamental analysis of the AUD/JPY examines economic data such as interest rates, inflation, and economic growth of Australia and Japan to assess if the AUD/JPY exchange rate reflects their true value. This helps identify potential trading opportunities if the market seems to be mispricing the currency pair based on these economic factors.

Popular AUD/JPY Trading Methods

Choosing the right strategy for you among the most popular trading strategies depends on factors such as your trading knowledge and experience, your trading capital, your time horizon, your risk appetite and your objectives. Let's have a look at some popular trading methods used for AUD/JPY:

Currency carry trade. To better understand the concept of currency carry trade, let’s take a hypothetical example with the AUD/JPY pair. Think of it as a seesaw with the Australian economy (with higher interest rates) on one side, and the Japanese economy (with lower interest rates) on the other.

A currency carry trade with the AUD/JPY currency pair is like borrowing money on the Japanese side (cheap loan with JPY) and using it to invest in the Australian economy (higher interest rate with AUD). The goal is to profit from the rate differential (the difference in interest rates) between both countries just by holding a long trade (buying AUD/JPY).

This Forex trading strategy can work better for traders who would rather focus on fundamental analysis and a longer-term horizon, like position traders, who believe the interest rate difference will persist for a while, allowing them to profit from it for an extended period. Of course, currency movements can impact the final outcome of the trade. If the AUD weakens significantly compared to the JPY, for instance, it might outweigh the interest rate benefit.

Breakout trading is a technical analysis strategy that attempts to capitalise on the price movement acceleration of the AUD/JPY when the pair breaks below an important support level (bearish breakout) or breaks above a significant resistance level (bullish breakout). This breakout potentially suggests a potential shift in market sentiment and a continuation of the price movement in that direction after a pause in the main trend within a trading range.

Of course, false breakouts can also occur (temporary AUD/JPY movements beyond a key level that quickly reverse). Traders should therefore look for additional confirmation to confirm the breakout in line with their trading strategy, like higher trading volume and liquidity and continuation chart patterns, for instance.

Breakout trading is often used by active short-term Forex traders like those using intraday trading strategies.

News trading is another type of short-term trading often used by FX traders to profit from the (very) short-term AUD/JPY movement due to potential higher market volatility from the release of major economic news.

Alongside economic releases, trading economic data often relies on technical indicators to identify potential entry and exit points. These indicators can help gauge market sentiment and potential price direction around the news event (either before or just after a piece of news is released). News trading can also rely on breakout trading.

The fast-paced nature of news trading can trigger emotional decisions and lead to significant losses. Therefore, experience in managing risk and a cool head under pressure are crucial for AUD/JPY news traders to avoid key trading mistakes.

How to trade AUD/JPY with Plus500

To start trading the AUD/JPY through Forex Contracts For Differences (CFD) with Plus500, follow these steps:

  1. Sign up on Plus500 to open your CFD trading account.
  2. Start with a demo account to practise with virtual funds. Moreover, there is no time limit to use the demo account with Plus500, so you can take as much time as you need.
  3. Get familiar with the trading platform and learn how to use Plus500 risk management tools to better protect your capital.
  4. Once you're ready, switch to a real trading account and fund it either through Visa or MasterCard, electronic wallets or bank transfer (the available options will depend on your region).
  5. Go to the trading platform.
  6. Select the AUD/JPY currency pair from the FX pairs available in the instrument category section.
  7. Decide if you want to open a long position (buy) or a short position (sell) on the AUD/JPY Forex pair.
  8. Adjust the size of your position (number of contracts).
  9. Set up your money and risk management parameters (mostly stop-loss and take-profit orders).
  10. Verify that everything is correct and click on “Buy” or “Sell” to open your position.
  11. Monitor your position and evaluate your trading.

AUD/JPY Trading — Frequently Asked Questions:

Is AUD/JPY a good pair to trade?

The decision to trade a currency pair depends entirely on your trader profile, risk tolerance and objectives. The AUD/JPY is a popular pair among the minors in currency carry trade strategies due to the high interest rate differential between the two countries. It is also a Forex pair used by Forex traders to diversify their FX holdings.

What are the trading hours for AUD/JPY?

The Forex market is open around the clock from Sunday 22:00 CET to Friday 22:00 CET.

When should the AUD/JPY be traded?

Even though you can trade the AUD/JPY whenever you want during the week, you may consider focusing on the most active trading hours — which are during the Asian session.

What are the most common mistakes to avoid when trading the AUD/JPY pair?

To avoid common AUD/JPY mistakes, trade with a plan that includes risk management rules, understand the currencies' dynamics and learn to adapt to changing markets.

What are the different trading strategies used with the AUD/JPY Forex pair?

Depending on your trading profile and experience, as well as your trading style, you can use different methods to trade the AUD/JPY. Breakout trading, trend trading, carry trading, momentum trading and news trading are among the most popular trading strategies used on the AUD/JPY FX pair.

How can I start trading the AUD/JPY?

Once you've worked on your trading strategy and written your trading plan, you can open a trading account with Plus500 to start trading the AUD/JPY.

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