CAD/JPY Trading Tutorial

Since the pandemic broke out, economies have experienced a decline. The global event has caused volatility in the currency market that has never been seen before. 

While other workers and businesses have closed down, the trading business, on the other hand, has never been more lucrative. 

The wild and unexpected volatility in the currency rates open up lots of opportunities for traders. 

The CADJPY is popular among traders, old and new. It has to do with its high liquidity and low-bid spreads.

This guide explains the factors that can impact the CADJPY exchange and strategies for managing them. 

Basic Information on CADJPY

The CADJPY or CADJPY is the currency exchange between the Canadian Dollar and the Japanese Yen. 

Currency exchange has a base and a quote currency. In this case, the base is the Canadian Dollar and the quote is the Japanese Yen. 

To better understand, you have to know that the quote currency is the amount of money it needs to buy the base currency. 

In the case of CADJPY, if the exchange rate is 50, it means that it takes 50 Japanese Yen to buy a single Canadian Dollar. 

Currency and economic background

Before we go any further, let us first take a look at a brief history of Yen and Canadian Dollars.

Japanese Yen

The Japanese Yen wasn’t in use until the 17th century. At that time, the Japanese government did not officially adopt it as their official currency. It took months after it was first circulated before they made it official.

Before the yen period, there was a disorganized currency system in Japan. 

Hansatsu was first used. The currencies were inconsistent because it was individually and separately issued by the feudal fiefs. 

It was only during the reign of the Meiji Dynasty that the government made reforms in its currency system.

When the Yen was adopted, the government allowed individual banks to print money independently. 

But they later realized the downsides of this system, so the Bank of Japan was established. It unifies and centralized the money system and policies.

Printing and distribution of the Yen became an exclusive responsibility of the Bank of Japan. 

Canadian Dollar

The Canadian dollar is also called colloquially the loonie. The name came from the loon carved on the face of the 1 Canadian Dollar coin.

Throughout the country’s history, the coins bore the face of the reigning monarch

It is the official currency of Canada and has been in use since the middle of the 18th century. Today, the Canadian Dollar is minted in the Royal Canadian Mint in Manitoba.

Its distribution and regulation is a duty given to the Bank of Canada (BOC).

The Canadian Dollar replaced the Canadian pound. And for years it has moved back and forth between being pegged with the United States Dollar and being a floating currency.

The currency’s relationship with the US dollar was greatly affected by the politics between both countries.

The Canadian dollar is a reserved currency or benchmark currency. This means that countries around the world keep it in their central banks as a reserve currency.

Other reserve currencies include the United States dollar, Euro, Dutch guilder, Pound sterling, Japanese yen, and Swiss franc.

What moves the CADJPY trading pair?

The CAD /JPY is not an uncommon trading pair but it is also not that popular. It is a cross-currency pair. 

Cross-currency pairs are pairs that do not include the United States Dollar.

But even so, trading the CADJPY is very profitable if done properly. 

The rate of exchange for the CADJPY is determined by several factors. Its movement will depend on which or if both currencies strengthen or weaken. 

For example, if the Canadian Dollar strengthens against the Japanese Yen, that would mean that one Canadian Dollar would be worth more Japanese Yen. In this case, the rate of CADJPY will rise.

Why is trading CADJPY ideal, and why not?

Let us see the benefits and disadvantages of trading CAD to JPY.  

Advantages

Predictable market direction

The Canadian Dollar is positively correlated to the value of the United States Dollar. Canada and the United States have a strong political and economic relationship that is built because of their history and proximity to one another. 

Although, it would be wrong to assume that their exchange is not one-to-one.

The United States Dollar is the strongest currency in the world and it is growing stronger over the years. 

Because they are tied together, it can be predicted that the value of the Canadian Dollar will also rise with it. 

Security in the currencies

The Japanese Yen and the Canadian Dollar is among the leading currencies in the world. 

Other countries use them as a national reserve. They are called the safe haven currencies. 

These are the monetary instruments that people will use near the end of the world or any global economic chaos. 

They will last longer than other currencies and will predictably increase in value. 

Both the Japanese Yen and Canadian Dollar are considered global safe haven currencies. In the event of a world crisis, though their values may fall, they will still be considerably higher than most currencies. 

Other safe haven currencies are the Swiss Franc, Euro, Sterling pound, and the US Dollar.

Unlimited and free access to trading resources 

The internet has made trading easier. Back then, you would have to read numerous books and listen to endless lectures to be confident in your trading knowledge. 

Now anyone wanting to learn can google the answers and watch YouTube for trading tips and coaching. 

Access is free and unlimited. What’s more, is the information pool grows larger every day as new content is being uploaded every minute. 

Forex sites are one of the best sources of trading information. It can show you: 

  • hourly forecasts on the forex market and all changes in rates
  • latest local and international news on factors that can affect the market
  • accessible technical and analytic indicators 
  • historical market information
  • live chart of CADJPY
  • up to date client reviews on brokers, market and currency pairs

Easy to trade even for newbies

Because the CADJPY is fairly stable and straightforward, trading is easier for new and old traders. 

Disadvantages

The benefits of trading CADJPY are very attractive. But it also has its challenges.

Though the benefits are enticing, there are still risks in trading CADJPY. 

Japanese intervention

Central banks are responsible not only for the circulation and printing of money. It also plays a part in monitoring the economy. 

The Japanese central bank is very active in maintaining its economy. 

The actions of central banks will depend on political, environmental, and social events and market movements. 

Market volatility

The volatility of a market is its sharp price movements. These changes can be sudden and unexpected. 

And while they are tools that can measure volatility, they are not accurate. It is because forex trading is not an exact science. 

But when it comes to CADJPY, it is stable most of the time. It means the volatility is low. 

But as we said, there is no way to accurately predict price movement. So be prepared for any sudden changes. Watch out for any signal so that you will know when to change position. 

Computers

Forex trading involves a lot of gut feeling, research, and, most importantly, math. 

While there are people who are great at math, sometimes the math takes too long to solve. It is why people lose to computers. 

Computers can process thousands of data using sophisticated algorithms in minutes and even seconds. 

It creates a disadvantage for others who do not have access or cannot afford to trade with forex robots. 

Using Leverage

Leverage is a debt. It allows you to trade more than your actual deposit. 

But while trading a greater amount increases your potential profits, it also increases your loss if a trade goes south. 

Trading CADJPY through a forex broker 

Forex brokers are companies that allow traders to access varied platforms for trading currencies. 

One of the things traders must do before creating trading accounts is choose the right forex broker.

In doing so they should do a reliability check on their prospect brokers. Here are some mentionable forex brokers. 

Capital.com

It has offices worldwide, including the United Kingdom, Belarus, and Cyprus. It operates globally and allows citizens from at least 180 countries to trade through them. 

Capital.com has a license from:

  • UK Financial Conduct Authority
  • Cyprus Securities and Exchange Commission 
  • Belarus National Bank

It uses several platforms, including its web-based platform, MetaTrader4, and a mobile trading app. 

They also have a learning app that provides guides and trading tutorials. It is compatible with Android and iOS devices.

What are the benefits of trading through capital.com?

This company provides several opportunities and benefits.

  • Customer support is available 24 hours a day through live chat and phone calls which supports at least 20 different languages.
  • The trading platform is operated by an AI, which makes it more efficient.
  • Quick execution of orders
  • $20 minimum deposit (one of the lowest offers out there)
  • It charges $0 for commission 
  • Extensive resources, learning materials in the form of courses and trading guides
  • Learning material is accessible from an educational app.
  • Provides price alerts to keep you up to date with the market
  • The web-based platform is compatible with desktops, and trading apps are downloadable to iOS and Android devices.

Is Capital.com a reliable forex broker?

Capital.com is one of the most reliable and legit forex brokers worldwide. The proof is the numerous awards and ratings it received in recent years.

Here is a list of those awards:

  • Best Trading Features
  • Best Forex Trading App
  • Best Online Trading Services
  • Most Transparent Brokerage Service Provider of the Year
  • Most Innovative Broker
  • Most Innovative Broker

Is Capital.com suitable for new traders?

The answer is a definite yes.

Trading with Capital.com has been made easier and more convenient.

The use of artificial intelligence improves and simplifies the trading experience of new users.

On top of that, their platform offers a learning mode option. It gives new traders access to free trading courses, guides, tutorials, and webinars.

The resources are easily and conveniently accessible from their educational mobile app.

The best thing is, the support, resources, and app are all free.  

Vantage FX

Vantage FX is an Australian company that operates globally. 

It is a reputable broker that implements several measures to secure its client’s fund. These include insurance liabilities and using globally recognized banks.

It offers low trading fees and low bid spreads.

What are the benefits of trading through Vantage FX?

  • Low minimum deposit 
  • Quick verification process when opening an account
  • No commission fee for trading
  • No withdrawal and deposit fees
  • Client and company funds are held in separate accounts
  • Uses various trading platforms (MT4, MT5, Vantage mobile trading app, and other social trading platforms)
  • Holds funds in National Australia Bank and Australian Commonwealth Bank
  • Allows leverage trading of up to 1:500

Is Vantage FX a reliable forex broker?

Vantage FX has regulation in several countries, including:

  • Соединенное Королевство
  • Австралия
  • Cayman Islands

Roboforex

Roboforex provides opportunities. It has established offices around the world.

It uses various platforms like CopyFX, cTrader, MT5, MT5, and mobile apps.

What are the benefits of trading through capital.com?

  • 24/7 live chat and email support that is available in at least 10 languages
  • Fast registration and account processing
  • Offers several types of accounts (Prime, ECN, Pro, and ProCent)
  • Different methods of deposit and withdrawal
  • High affiliate payment
  • Offers leverage trading of up to 1:2000
  • Low minimum deposit ($10)

Is Roboforex a reliable forex broker?

Roboforex has received numerous awards. They earned top recognition in an area like:

  • Global Forex Affiliate Program
  • Investment Products, Global
  • Educational Forex-Centre in CIS
  • Investment Platform

Things to consider when trading CADJPY

Even if the CADJPY is easier and safer to trade than others, there are still some challenges. 

Let us look at some helpful tips to boost your trading strategies. 

Other

Correlation with oil price

Canada is an exporter of oil. It is the fourth-largest crude oil exporter in the world.

When the price of oil declines, the value of Canadian Dollars decreases too. If this happens, Japan benefits because it is an importer.

Hence, the value of the Japanese Yen strengthens against Canadian Dollars and decreases the exchange rate of CADJPY.  

Correlation to other currency pairs

Forex trading is a big domino box. It moves in ripples. Changes in one currency can affect the rate of other currencies. 

Correlations are categorized as:

Positive correlation

The currency pairs move in the same direction. It means that if the rate of one pair rises, the exchange rate of the correlated pair also rises. If one falls, the other also falls. 

These currency pairs positively correlate with CADJPY.

Currency PairsPercentage of Correlation
Australian Dollar vs. Japanese Yen
AUD / JPY
96.3%
Norwegian Krone vs. Japanese Yen
NOK / JPY
95.4%
Australian Dollar vs. Swiss Franc
AUD / CHF
95.3%
Singapore Dollar vs. Japanese Yen
SGD / JPY
95%
Great Britain Pound vs. Japanese Yen93.8%

Negative correlation

A negative correlation is an opposite. 

Negatively correlated currency pairs move in opposite directions. If one currency pair moves up, the other currency pair moves down and vice versa.

These currency pairs positively correlate with the CADJPY.

Currency PairsPercentage of Correlation
Euro vs. Norwegian Krone
EUR / NOK
-95.3%
US Dollar vs. Canadian Dollar
USD / CAD
-94.8%
US Dollar vs. Norwegian Krone
USD / NOK
-91.1%
US Dollar vs. Turkish Lira
USD / TRY
-87.6%
Euro vs. Turkish Lira
EUR / TRY
87.4%

Price of gold

Another correlation is the relationship of a currency’s value to the price of gold. 

Gold is not in any way a form of currency. But it is a valuable asset. 

Governments use it as a guarantee to redeem any debts. 

There is a positive link between gold and the Japanese Yen. If the price of gold rises, the value of Yen also rises, and the rate of CADJPY will decrease. 

Economic Performance

The state of both economies has an impact on the exchange rate.

The stronger one currency is the higher its value against the other. 

If the Japanese economy rises, the exchange rate between CADJPY will decrease.

And inversely, if the Canadian economy rises, the exchange rate between CADJPY will increase.

Trading relationships

Japan is a commodity currency. It means that the value of Yen depends on the prices of commodities. 

Also, Japan is one of the largest global exporters. Its top trading partners are Korea, China, and the United States. 

A diplomatic understanding between these countries and Japan drives the Japanese economy upwards. 

It proves that good relations between countries are not only for politics but also for the economy. 

Rate of economic growth

Canada and Japan belong to the top economies in the world. But if you study the history of their economies, the rate of advancement is different. 

The pace of economic growth of each country varies. It is affected by many factors, including political, geographical, environmental, and social. 

Both countries faced political struggles in the 20th century. 

But over the recent years, Japan has advanced farther and faster than Canada. It means that the rate of CADJPY has been decreasing over the years. 

Canada’s slow growth may be on account of its low population. 

While the country boasts a large land area, its population is growing slowly. Fewer people mean less labor force. 

Strategies in trading CADJPY

There are various trading strategies that you can apply with forex. Here are some that are tailored for trading CADJPY.

News trading strategy

Trading news means you’re making trading decisions based on news events and releases. Trades are also opened before a news release based on market expectations.

Some aspects make the values of the Canadian Dollar and Japanese Yen susceptible to changes based on news reports.

The Canadian dollar is a big oil exporter. News of decline in oil price can result in to fall in its currency value.

Similarly, Japan is also an industrial country that relies on export trade. A fall and rise in the price of commodities will also cause a rise and fall in the value of Yen.

If you are trading the CADJPY, look out for new reports on the prices of goods and services provided by the two countries.

Other relevant new releases to look out for are:

  • Interest rate decisions
  • Industrial production
  • Retail sales
  • Surveys on consumer confidence, manufacturing, and business sentiment
  • Trade balance
  • Unemployment
  • Inflation 

The relevant news releases happen on 6:50 to 11:30 p.m. EST for Japan and 7 to 8:30 a.m. EST for Canada. 

There are two main benefits of news trading CADJPY.

One is it allows you to know when to enter and exit the market. The second is shows you several market opportunities.

The downside is it carries an overnight risk. Traders also need to rest, but unfortunately, the news and the forex market do not. A rise and fall can happen overnight.

Swing trading strategy

This strategy aims to trade both sides on the movement. Swing traders buy when they think that there is an uptrend in the market and sell if there will be a downtrend.

Swing trading relies on timing. The traders predict the height and duration of a rise or fall based on current market expectations, past movements, and other factors.

There are various reasons why swing trading is perfect for CADJPY.

One, CAD and JPY are two Major currencies, which means they have high liquidity. Though this pair is stable, the trading volume makes it safer, especially for beginners.

Two, Japan’s economy depends on the prices of the exported commodity.

Three, Canada is an exporter of oil. Changes in oil prices affect the value of their dollar.

Trend trading strategy

The motto trend is you friend is true on all currency pairs, including CADJPY.

Traders who use this strategy also use technical tools. They analyze and predict the direction of a trend. After which, they enter a position based on that prediction.

When following the trend of CAD and JPY, traders use specific tools that analyze commodities, export, currencies, and equities.

Each trader should outline their rules for what and when to do it because riding the trend can be difficult.

The key to trend trading is to be wary of signals that indicate a change in the trend.

Important tip: Nearing the end, the trend can accelerate as traders on the wrong side will cut their losses. 

Position trading strategy

This strategy is less stressful than day trading. It looks more at the long-term trend than the minor fluctuations.

The trader holds a position for months and even years.

Position trading fits CADJPY since both are major currencies. They are likely to hold their value for a long time.

While it takes patience, position trading can be highly profitable.

Scalp Trading Strategy

Scalping is the exact opposite of position trading. Scalper profit from small market fluctuations.

Although they only have minimal profits for every trade, scalpers hope that they accumulate significant profit from small trades.

CADJPY is affected by the prices of oil and commodities. And these prices can fluctuate slightly in the course of a day. These slight changes are what scalpers take advantage of. 

Carry Trading

Carry trading involves taking advantage of low interest rates. 

Carry traders borrow currencies from countries with low interest rates and invest them in a high-interest currency pair. 

It is a complex strategy that takes years of experience to master

Day trading strategy

Day trading requires more dedication than position trading. It can be full-time work.

Day traders open several positions between the opening and closing hours of the market. This way eliminates the risk of overnight losses.

Day trading CADJPY is best when the Asian and London market overlaps. The American market and Asian market do not have an overlapping session.

Tokyo is the first to open its market in Asia at 7 p.m. it overlaps with the London market between 3 a.m. and 4 a.m.

 Most US trader is not awake during this time, so there are significant changes. 

Price action trading strategy

This strategy involves studying past price trends. It can be used as a single strategy or incorporated as one technique in a larger trading plan.

When trading CADJPY, you can use various tools to predict market direction using historical data. These include:

  • Using candle wicks
  • Indicators
  • Oscillators
  • Fibonacci retracement method

Parting words

If you are new to forex trading, the CADJPY is a good fit for you.

Both CAD and JPY are Major currencies. The pair has low volatility, low bid spreads, and fewer risks. 

Still, forex trading carries risks no matter what pair you decide to trade. 

The thing to remember is, always prepare. Preparedness entails research.

Maximize the use of your internet. Look for reviews, tutorials, and guides. 

Look for a broker you can trust and provide the tools and support you need.

Lastly, analysis of social and political factors combined with technical analysis will give you a solid trading strategy.

Witzeltrading.com

Контакт

Витцель Капитал ЛТД.

Кипр, 7557 Ларнака, Мазотос Хиллз 4, блок D, квартира 203

ru_RURussian