Forex Currency Correlation Table PDF and Cheat Sheet

We introduce people to the world of trading currencies, both fiat and crypto, through our non-drowsy educational content and tools. We’re also a community of traders that support each other on our daily trading journey. Furthermore, because of this Forex pair’s connections to important global trends, it may serve as a barometer of the European and Japanese economies. The factors affecting EURJPY are almost countless in the short term, but in the long term the rate is based on fundamentals, mainly the inflation and interest rates. We won’t show you the performance metrics of the last two ETFs, but by looking at the graph, you can guess pretty well how they do.

Best time to trade EURJPY?

Following World War II, the yen’s value diminished, but it was stabilized at ¥360 per US dollar under the Bretton Woods system, later transitioning to a floating exchange rate in 1971. The euro, abbreviated as EUR, is the official currency of the Eurozone (EZ), which consists of 20 EU member states. Introduced in 1999, the Euro has become one of the most traded currencies globally, following the US Dollar. For the first several years following its debut, the euro lagged behind its transatlantic counterpart, but since 2002 it has nearly continuously equaled or exceeded the value of the greenback.

Sentiment analysis plays a role in enhancing the effectiveness of EURJPY trading strategies, at least in te short term. By gauging market sentiment, traders can gain valuable insights into the prevailing mood and attitudes of market participants towards the Euro (EUR) and Japanese Yen (JPY). EURJPY is considered a minor pair because it is formed by cross-pairing EURUSD with USDJPY.

Traders can customize these strategies to suit their individual preferences and combine them for optimal results.
In the forex world SGD/JPY, CAD/JPY, and SEK/JPY currency pairs are positively correlated.
Before delving into specific trading strategies, it’s important to understand fundamental and technical analysis, the two primary methodologies in Forex trading.
Positive events, like GDP growth, correlate with currency pair appreciation, while negative events, such as recessions or geopolitical tensions, lead to depreciation.

EURJPY Analysis

Better than forecast data increases the demand for related currency and impacts the value of either the Euro or the Japanese Yen, causing fluctuations in the EUR/JPY exchange rate. The Yen is a historically low-yielding currency, leading traders to borrow cheaply in JPY to purchase higher-yielding currencies, including EUR. Because of this, the pair is sensitive to the broad-based market view trend fluctuations. Volatility may be found in news related to the Eurozone debt crisis and from the Bank of Japan’s anti-deflation policy efforts introduced in 2013. Let’s say you go long two currency pairs that move in the same way such as EUR/USD and GBP/USD.

Momentum strategies, for example, may benefit from increased volatility as strong trends can develop more quickly. Additionally, volatility-based indicators such as the Average True Range (ATR) can help traders adapt their risk management strategies to account for heightened market uncertainty. Market volatility can significantly impact the effectiveness of a EURJPY trading strategy. When volatility is high, price movements in the EURJPY pair tend to be more erratic and unpredictable.

What is Forex Currency Correlation?

Suppose a trader believes that the Euro will strengthen against the Japanese Yen. The current exchange rate is 130.00, and the trader decides to buy 10,000 EUR/JPY CFDs. If the exchange rate rises to 131.00, the trader profits from the difference in price. After entering the pair you are trading, the time frame you want to see correlation levels for, and how many periods to calculate, you will quickly see the other pairs that are most likely aligned. One of the easiest ways to see the potential positive and negative correlation for your Forex trades is by using eurjpy correlation a calculator. If you enter two trades where the pairs are closely correlated, you risk having two large winners or two large losses.

EURJPY trading strategy backtest – does it work?

Japan’s currency policy involves periodic intervention to manage its value, aiming to maintain a competitive export market. Events such as the Plaza Accord in 1985 and subsequent fluctuations led to shifts in the yen’s value, impacting Japan’s economic position. Despite efforts to stabilize it, the yen depreciated significantly against the dollar from late 2021 to 2023, prompting concerns about its long-term strength. The Japanese Yen (JPY), Japan’s official currency, holds significant prominence in global markets, ranking third in foreign exchange trading behind the US dollar and the euro. I hunt pips each day in the charts with price action technical analysis and indicators.

Economic indicators such as GDP growth and unemployment rates impact investor confidence, affecting currency values. Political stability encourages investment, strengthening currencies, while instability can lead to depreciation. In recent years, Central Bank policies, particularly those of the European Central Bank (ECB) and the Bank of Japan (BoJ), have played a pivotal role in shaping the EUR/JPY exchange rate. Divergent monetary policy stances, such as quantitative easing programs and interest rate differentials, have led to notable shifts in the pair’s valuation. Post-crisis, the Eurozone faced challenges such as sovereign debt issues and economic disparities among member countries. These factors contributed to fluctuations in the EUR/JPY pair as traders assessed the economic health of both regions and adjusted their positions accordingly.

The correlation between the EUR/JPY pair and global economic events is significant. Positive events, like GDP growth, correlate with currency pair appreciation, while negative events, such as recessions or geopolitical tensions, lead to depreciation. Monitoring these events helps traders make informed decisions, but risks are inherent in Forex trading due to market volatility. One way sentiment analysis contributes to EURJPY trading strategies is by providing early indications of potential market movements. By analyzing sentiment indicators such as news sentiment, social media sentiment, or sentiment derived from market data, traders can anticipate shifts in market sentiment towards the EUR or JPY. It is also common for a trader to use risk management techniques, such as stop-loss orders, to help manage their exposure to the pair.

While beginners should indeed proceed cautiously, EURJPY can offer valuable insights into global economic trends and geopolitical factors. With proper education and risk management, beginners can learn valuable lessons from trading EURJPY, honing their skills for more complex markets. Ultimately, the decision depends on individual risk tolerance and dedication to learning the intricacies of currency trading.

While informed decisions are valuable, the Forex market carries inherent risks, emphasizing the need for caution despite diligent analysis.
Because the Yen is considered a safe haven amongst the major currencies, investors sell the Euro and “hide” in the Yen.
With proper education and risk management, beginners can learn valuable lessons from trading EURJPY, honing their skills for more complex markets.
We’re also a community of traders that support each other on our daily trading journey.
Trading the EUR/JPY currency pair can be a rewarding endeavor for those equipped with the right knowledge and skills.

You are not likely to succeed in trading EUR/JPY unless you are systematic and backtesting. You are competing against thousands of other traders, and the forex market is a zero sum game. At the end of the article, we present a backtested EURJPY trading strategy.

Yes, EUR/JPY is a leading indicator for stocks, according to our backtests. Pairing it with another technical indicator or into a trading system can work better than on its own. A dovish policy, which is also known as expansionary policy, from either of the central banks, weakens the related currency. In contrast, a hawkish monetary policy (contractionary policy) strengthens the currency. If you think that the exchange rate of 1 euro to the yen will rise, it could be the time to issue a buy order. Conversely, if you think that this rate will fall, you may wish to issue a sell order.

In all three countries, the returns are practically the same as buy and hold, but you are invested only around half the time. More importantly, maximum drawdown is also significantly reduced, making this strategy even better. Employment Change – Both of the currencies are sensitive to changes in employment, as slacks in the labor market cause a drop in Inflation rates. Positive Correlation – The positive relationship merely is when pairs move in tandem with each other. The other super handy feature is that you can use your mouse to scroll from pair to pair, and it will highlight the correlation for other pairs.

Furthermore, employing a trend-following approach in the EURJPY trading strategy allows traders to participate in larger market moves, potentially leading to substantial profits over time. The movements in the EUR/JPY pair can be influenced by several key factors, including for example interest rates, economic performance, political tensions, and international trade levels. Interest rates play a significant role in shaping the exchange rate between the euro (EUR) and Japanese yen (JPY). The Japanese yen is considered a ‘safe haven’ currency, rising during economic uncertainty. Global trade patterns and policies also influence the EUR/JPY pair, with protectionist measures impacting trade levels and currency exchange rates.