EUR/JPY is one of the most popular trading instruments in the global forex market. Here EUR is the base currency and JPY is the counter currency. The pair comprises the two most traded currencies in the world. Its average daily trading volume is over $3.2 billion, according to the Bank for International Settlements.

EUR/JPY is a highly volatile pair, which allows traders to profit from short-term fluctuations in its exchange rate. The carry trade strategy can be used for trading this pair. JPY is a low-yield currency that is traditionally seen as a “safe haven" in times of economic upheavals.

Advantages of EUR/JPY

• Volatility
  EUR/JPY is usually highly volatile during most trading sessions. This ensures that traders can find plenty of entry opportunities when trading this pair.

• Tight spreads
  Most cross rates involving JPY have relatively high spreads. Meanwhile, EUR/JPY has always had low and competitive spreads, which makes overall trading costs lower.

• Stock indicator
  EUR/JPY is considered a leading indicator for stocks around the world. Their correlation has repeatedly proved to be effective with the pair rising when stocks trade higher and traders having trust in the economy. When confidence declines, EUR/JPY also goes down signaling outflows of capital from stock markets.

Bodies influencing EUR/JPY

• Bank of Japan
  The Bank of Japan (BOJ) has the biggest influence on the JPY exchange rate. Therefore, it is important to monitor the regulator’s monthly interest rate decisions and involvement in the bond market. In recent years, Japan has implemented an aggressive monetary policy, which resulted in a weaker national currency.

• European Central Bank
  The European Central Bank (ECB) also announces rate decisions and releases accompanying letters monthly. The ECB is an active market player and makes important decisions regarding individual member states of the European Union, such as borrowings or stimulus packages, which may have an impact on EUR and, consequently, on the EUR/JPY rate.

• Japan Statistics Bureau
  JPY is a news-sensitive currency. Therefore, it is important that EUR/JPY traders track major data releases by Japan’s Statistics Bureau. Important news includes Trade Balance, GDP, and the CPI.

• Japan Meteorological Agency
  Japan is prone to natural disasters that may shatter its main economic sectors. Therefore, it is important to monitor severe earthquakes reported by the Earthquake Early Warning (EEW) system, as they may exert pressure on JPY.