You can now trade minor forex pairs such as EUR/JPY online. Using your desktop or mobile and our top-rated brokers, you can play the financial markets, get expert insights, and more. This guide to EUR/JPY forex trading is the perfect starting point for anyone looking to speculate on a popular currency pair.
EUR/JPY is regarded as a minor pair in forex trading. In basic terms, EUR/JPY compares the value of the base currency (EUR in this case) to that of the quote currency (JPY).
To put it another way, EUR/JPY forex trading is the act of exchange JPY for EUR. By pairing the two currencies, traders are able to profit when the value of one changes against the other. This is the basis of forex, and the reason you can trade EUR/JPY.
Forex categorises pairs according to their liquidity and trading volume. If there’s a lot of activity in the market, it’s classed as a major pair. If there’s less activity, it’s regarded as a minor pair.
In general, currency pairs that include USD are regarded as “major” because it’s the most traded currency in the world.
EUR/JPY sits outside of the majors but it’s still highly tradable due to the popularity of its constitute currencies. Both the Euro and the Japanese Yen are ranked amount the top eight currencies in the world.
Therefore, our top-rated forex brokers will offer daily trading options for this minor pair.
The Japanese Yen was introduced in the 19th century as part of the Meiji government’s economic modernisation program. It was modelled on the decimal system popular in Europe at the time, and aimed to unify Japan’s monetary policies.
Prior to the advent of the Yen, Japan’s feudal fiefs (regions) all had their own currencies. The Yen changed that and became the standard currency across the country.
The Euro was introduced in 1999 and had a similar role to that of the Yen. The European Union (EU) is made up of 27 countries, each of which share a political union. However, prior to the introduction of the Euro, member states had their own currencies.
The Euro brought homogeneity to the EU. Although it wasn’t adopted by every member state (19 EU countries currently use it), it’s regarded as the block’s default monetary system. As such it’s become the second most traded currency in the world behind the US Dollar.
These historical similarities make EUR/JPY an obvious currency pair as they united once-fractured monetary systems. This, in turn, makes it a relatively stable pair to trade.
Moreover, EUR and JPY are the second and third most traded currencies in the world. In fact, both are widely used as reserve currencies (i.e. backups) for major countries. The only currency that’s used more widely as a reserve is USD.
This means you will always find activity within the financial markets when it comes to EUR/JPY forex trading.
The EUR/JPY forex trading pair can be affected by numerous political and socioeconomic factors, some of which we’ve outlined towards the end of this guide.
However, from a general perspective, you can expect the value of EUR/JPY to move in response to elections, wars, civil unrest, economic instability, quantitative easing, trade issues, and pandemics.
The Euro was designed to unit members of the European Union under a single currency system. 19 of the block’s 27 member states use the currency, which means fiscal policies are managed by the European Central Bank.
In practice, every country using the Euro has the same interest rates and, to some degree, economic policies. Given that the Euro is used by 340 million people, this gives it a huge amount of power both locally and internationally.
In turn, the Euro is affected by trade deals with other political unions/entities and, meaning that its value can impact other political unions/entities.
One interesting feature of the Euro is that events in one member nation can affect the currency as a whole. Even though Germany, France, Italy et al operate under a political union, they’re countries in their own right. As such, the Euro can fluctuate based on issues in one country.
The Yen isn’t affected by localised issues in the same way as the Euro. However, it still acts as a marker of Japan’s economic, political, and social power. Japan is one of the oldest major economies in the world, so JPY is a well-established currency.
However, it’s also true that the economy hasn’t grown significantly since the equity and real estate bubbles of the 90s. Despite this, Yen is still regarded as an important international currency. This incongruence between its status as a leading currency and Japan’s, often tricky, economic position means JPY can be a volatile currency to trade.
You need a strategy whenever you play the financial markets, and EUR/JPY forex trading is no different.
EUR/JPY forex trading is an uncertain business. You can never know for certain when the pair will increase in value and when it will decrease. Professionals make their best estimates by using a combination of subjective and objective data.
Subjective data covers things that can’t be objectively measured, such as news stories and expert opinions. Objective data is influenced by factors such as price history charts and technical analysis. By combining the two, you’ll give yourself the best opportunity to trade EUR/JPY at the right times.
You can trade EUR/JPY using our recommended forex brokers. Once you’ve clicked the registration links and created an account, you’ll need to make a deposit. From there, you search for the EUR/JPY pair in the trading lobby and make one of two options:
When you “buy” a forex pair, it’s also known as going long. It basically means you think the value of the pair will increase. So, when it comes to the EUR/JPY forex trading pair, a buy order (aka a long position) means you think the Japanese Yen will appreciate in value against the Euro.
When you “sell” a forex pair, it’s also known as going short. This means you think the value of the pair will decrease. So, when it comes to the EUR/JPY forex trading pair, a sell order (aka a short position) means you think the Japanese Yen will depreciate in value against the Euro.
You make a profit in forex when there is a positive difference between the point you opened a trade and when you close it. For example, if you go long on EUR/JPY, and JPY appreciates in value, you’ll make a profit. If, however, you went short, and JPY appreciates in value against the Euro, you’d lose money.
Naturally, if you took a short position and JPY lost value against the Euro, you’d make money and vice versa. The amount of profit you’ll make is the difference between the open and close prices.
So, if the price went from 1.1115 to 1.1120, the value has moved 5 pips. If you had a £10 stake on this, you’d make £0.50 (10 X 0.05). If you had £1,000 invested, you’d have made £50 (1,000 X 0.05).
This is just a basic example of how to calculate forex profits. In reality, you also have to consider lot sizes (i.e. currency pairs are sold in standard batches of 100,000 units).
For novice traders, this also brings into play something known as leverage. However, for the purposes of understanding the basic movements of currency pairs, you simply need to look at the difference between the pips and your stake.
Closing your position is a matter of timing. You’ll never be able to say for certain that XX time was 100% correct. However, just as it is with opening a position, you need to evaluate a variety of subjective and objective factors before making a decision.
Something else to note is that the top forex brokers offer automatic take profit and stop loss tools. These features will close trade automatically when you hit a certain amount of profit or incur a certain amount of loss.
The best way to trade EUR/JPY is to use a reputable broker. That’s where we come in. Along with our guides to forex, you can also scroll through our reviews to find your ideal site.
Each broker we recommend is not only highly regulated and legal, but offers some of the best trading conditions in the business. From access to MetaTrader 4 and MetaTrader 5, to promotions, tight spreads, and generous leverage; these sites are perfect for beginners, intermediates, and professional forex traders.
As we’ve said, trading the EUR/JPY forex pair isn’t without its risks. We’ve noted how the Japanese economy has experienced slow growth in recent decades and how that can make its currency volatile. We also know that the Euro can be disrupted by issues affecting one country within the EU. Some other risks to consider with regards to EUR/JPY forex trading are:
Staking too much: If you invest a large portion of your bankroll, you’ll put yourself under too much risk because one trade could wipe you out.
Too much leverage: Leverage is great because it gives you access to a greater market position with a small stake. However, just as leverage can enhance your profits, it can also enhance your losses.
Too little information: You have to take in as much information and data as possible before making a trade. By failing to weigh up all the variables, you put yourself at risk.
There’s plenty of potential in the EUR/JPY forex trading pair. These are two of the most traded currencies in the world and that means there’s high liquidity in the market. When you combine this with excellent trading conditions at our top-rated forex brokers, there’s no doubt this is a great pair to trade.