Trade the EUR JPY Pair: Strategies and Factors to Consider

A forex correlation refers to the relationship between two different currency pairs–which can either be positive or negative. Top of the line economic events includes GDP, Employment Change, Industrial Production, and Consumer Price Index. 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. 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.

If you enter two trades where the pairs are closely correlated, you risk having two large winners or two large losses. The best way to keep current on the direction and strength of your correlation pairings is to calculate them yourself. Software helps quickly compute correlations for a large number of inputs. The upper table above shows that over one month, the EUR/USD and GBP/USD had a very strong positive correlation of 0.95. To be an effective trader, understanding your entire portfolio’s sensitivity to market volatility is important. The first reaction back in February-March when Russia invaded Ukraine was a selloff in the EUR/JPY pair as the market feared some wider escalation.

Overexposure in the forex marketis when you have too many active trades involving a particular currency. EUR/USD should be higher yet USD/JPY is at bottom ranges but both negatively correlate. Positive Correlation – The positive relationship merely is when pairs move in tandem with each other.

What Are Positive and Negative Currency Correlations?

This provides a clearer perspective on the average six-month relationship between the two currency pairs, which tends to be more accurate. Strong correlations today might not be in line with Eurjpy correlation the longer-term correlation between two currency pairs. That is why taking a look at the six-month trailing correlation is also very important. With a coefficient of 0.95, they had a strong positive correlation over the past year, but the relationship deteriorated significantly in the previous month, down to 0.28.

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Many charting packages (even some free ones) allow you to download historical daily currency prices, which you can then transport into Excel. So, when the European yields are rising, investors prefer to buy European assets which means selling Yen and buying Euros and vice versa when yields in Eurozone fall or the Japanese ones rise. In the chart below you can see how the EUR/JPY pair is correlated with the spread between the European and Japanese bond yields. 81.1% of retail investor accounts lose money when trading CFDs with this provider.

• 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.
• We here at BabyPips.com did a little research of our own and found out that EUR/JPY seems to be highly correlated with stock markets across the globe.
• 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.
• You can also see the correlation that shows how the JPY pairs are sensitive to risk sentiment by comparing EUR/JPY to other JPY pairs (even though the monetary policy divergence is the main culprit in 2022).

Correlations Do Change

AUD/USD vs USD/CHF is the last highly inversely correlated pair that ranges between -0.78 to -0.99 (-78% to -99%). The inverse relation between the two pairs is due to the US currency being in the quote currency place in the first currency pair and in the base currency place in the second one. Hence, any positive movement in the USD marks a negative movement in AUD/USD but a positive movement in USD/CHF.

How to Use EUR/JPY as a Leading Indicator for Stocks

Correlation is typically measured on a scale of -1 to +1, known as the correlation coefficient. The currencies that are the most correlated are EUR/USD and GBP/USD. Utilising protective stop-loss and take-profit targets further may enhance the effectiveness of these strategies. Copyright © 2025 FactSet Research Systems Inc.© 2025 TradingView, Inc.

• In the example below you can see the correlation between EUR/JPY, GBP/JPY and CAD/JPY.
• On the flip side, when the sun is bright and risk appetite is rampant, investors pour their money into stock markets, which in turn leads to a rise in the EUR/JPY.
• If there’s any reason many professional forex traders enjoy using pair correlations, it is because it makes their analyses easier.
• Currency correlation refers to the relationship between two currency pairs and how they move in relation to each other.
• Any change in that currency’s exchange rate or commodity prices affects one another.

One of the highest correlated currencies with commodities are the Australian Dollar, the US Dollar, the Swiss Franc, the Canadian Dollar, the Japanese Yen and the Euro. A correlation coefficient of -1 indicates that two currency pairs will move in the opposite direction 100% of the time. The Russia-Ukraine conflict impacted negatively the European energy markets and energy prices skyrocketed. Although the situation is better than it was months ago, prices are still high, and companies and citizens are getting squeezed hard. The really high inflation that got worse after Russian-Ukrainian conflict is forcing the ECB to tighten monetary policy aggressively, which eventually leads to a really bad recession. These are all negative factors for the EUR, but the strong monetary policy divergence between ECB and BoJ supported anyway the Euro and made it to appreciate against the Yen.

EURUSD Negative Correlation Pairs

When two currency pairs have a positive correlation, they are positively impacted by each other and move in the same direction. For example, one of the most correlated currency pairs in the forex market is EUR/USD vs GBP/USD. If you open a long trade in both these currency pairs, a positive movement can potentially double your profits, but a fall can also potentially double the risks as well. Positive global economic events, such as strong GDP growth, increasing consumer confidence, or improving business sentiment, can lead to a positive correlation between the EUR/JPY pair and other currency pairs. This means that when the global economy is thriving, the EUR/JPY pair tends to increase in value.

GBP/USD vs EUR/JPY has a strong positive correlation that ranges between 0.88 to 0.94 (88% to 94%). The positive correlation between the two pairs stands due to the already discussed positive correlation between GBP and EUR, along with the strong and close trade relationship between Japan (JPY) and America (USD). Japan is also one of America’s closest and oldest allies, and the countries view each other favourably. Currency correlations can be traded in forex by identifying all currency pairs that have a positive, negative and no correlation to one another.

There is no relationship between these pairs, and they do not affect the movement of one another. This can be a lot of information to take in, especially if you’re a novice forex trader. So, in case you don’t yet know how to make trades using this information, check out our article on forex currency pair correlation trading strategy to help you out. For an easier way to monitor the correlation between currency pairs in MetaTrader 4, you can use this helpful indicator. This indicator allows you to track how different currency pairs relate to each other, providing valuable insights for your trading strategy. You can also see the correlation that shows how the JPY pairs are sensitive to risk sentiment by comparing EUR/JPY to other JPY pairs (even though the monetary policy divergence is the main culprit in 2022).

This is known as correlation when two Forex pairs are correlated in their movements. Let’s say you go long two currency pairs that move in the same way such as EUR/USD and GBP/USD. If the market shifts unfavorably, you could lose money on both trades instead of just one. This implies that when the EUR/USD rallies, the GBP/USD has also rallied 95% of the time.