The Best FX Pairs to Trade During the Tokyo Session

Many resources that prospective traders research encourage new traders to participate in high-volatility Forex trading sessions. While this is excellent advice, low-volatility sessions like the Tokyo trading session should not be discounted. A trader who knows the best Tokyo session Forex pairs with a top strategy can earn as much as those trading in other sessions.

TU experts believe that a trader needs a reputable Forex broker, the ideal currency pair, and a top trading strategy to profit in Forex trading. In this article, traders will learn about the top Forex pairs to trade during the Tokyo session.

Best Forex pairs to trade in Tokyo trading sessions

The Tokyo session, also known as the Asian session, sees significant activity from currency pairs that involve the Japanese yen and other Asia-Pacific currencies. These pairs are influenced by economic data releases and market sentiment from the region, providing unique trading opportunities. Here are some of the best forex pairs to consider:

USD/JPY

High liquidity and substantial trading volume (17% of daily forex transactions). USD/JPY is a staple in the Tokyo session due to the economic significance of both the U.S. and Japan. The pair is highly liquid, allowing for large volume trades with minimal price fluctuation. Its sensitivity to interest rate changes and trade flows between the U.S. and Japan makes it a prime choice for traders seeking to capitalize on these economic factors.

AUD/USD

Represents about 6.5% of daily forex transactions, highly influenced by commodity prices. AUD/USD is actively traded during the Tokyo session because of Australia’s prominent role as a commodity exporter. The pair's movements are largely driven by global commodity prices and economic data from the Asia-Pacific region, making it attractive for traders looking for volatility and responsiveness to economic indicators.

NZD/JPY

Moderate liquidity, influenced by risk sentiment and economic data from Japan and New Zealand. NZD/JPY offers trading opportunities based on the economic conditions and risk sentiment in Japan and New Zealand. The pair is particularly popular during the Tokyo session for its moderate liquidity and responsiveness to regional economic data, providing ample opportunities for traders to exploit market dynamics.

AUD/JPY

Known for strong volatility, driven by commodity market movements and regional economic data. AUD/JPY is a favored pair in the Tokyo session due to its strong volatility. The pair is sensitive to both commodity prices and economic indicators from Australia and Japan, offering traders opportunities to take advantage of short-term price movements.

EUR/JPY

Represents about 3% of daily volume, significant price movements influenced by European and Japanese economic data. EUR/JPY is a key pair during the Tokyo session, reflecting the significant trade relationships between Europe and Japan. The pair’s volatility and substantial price movements are influenced by economic data and monetary policies from both regions, making it a popular choice for experienced traders looking for active trading opportunities.

Where to trade Forex during the Asian Session?

To trade Forex effectively during the Asian session, it's essential to choose brokers that support a wide range of cross-currency pairs. Here’s what to look for:

1. Extensive Currency Pair Offerings: Select brokers that offer more than 50 currency pairs, ensuring the availability of key trading pairs with JPY. This broad selection allows for greater flexibility and opportunities to trade pairs that are most active during the Asian session.

2. Low Commissions: Opt for brokers that provide competitive and low trading fees. This helps to minimize costs and maximize potential profits, especially when making frequent trades during the session.

3. Good Regulation: Ensure that the broker is well-regulated by reputable financial authorities. This provides an added layer of security and trust, ensuring that the broker operates under strict financial standards and regulations.

Most popular currency pairs

The Forex market is active 24 hours a day, five working days a week, with a wide range of Forex currencies to trade. To succeed with Forex trading, you need to understand these pairs deeply. Earlier, we stated that choosing pairs from the major currencies is the best option for trading, especially if you are new to Forex. We have provided a brief profile of the six most traded currency pairs to help you make the right call.

EUR/USD

The EUR/USD pair accounts for 28% of daily Forex trades, making it the most traded currency pair on the Forex market. This is expected considering the pair represents the two largest economies globally, the United States and Europe. For beginners, stability and liquidity are two key factors to consider when trading. Unlike other currency pairs, there aren’t so many big price swings when trading EUR/USD.

USD/JPY

The next most traded currency pair after the EUR/USD is the USD/JPY. As it is otherwise known, the ‘gopher’ represents 13% of daily Forex trades. The USD/JPY rate is a standard for the performance of the Asian economy. The pair’s movement also tends to be in tandem with the USD/CHF and USD/CAD currency pairs due to the presence of the US dollar in all pairs as the base currency.

GBP/USD

GBP/USD, otherwise known as the ‘cable’, accounts for 11% of all daily trades. The GBP/USD pair tends to move in tandem with EUR/USD as they are well-developed markets. This pair is a good option for traders as they represent two of the most stable economies worldwide. The price movements are affected by interest rates stipulated by the Bank of England and the US Federal Reserve (Fed).

AUD/USD

The AUD/USD currency pair, dubbed the ‘Aussie’, makes up 6% of daily Forex trades. Because the USD is this pair’s ‘quote’ currency, its position is not as strong as the first three pairs. Also, the Australian dollar value is dependent on Australia’s commodities exports. Iron and coal represent a large proportion of Australian exports, and any rise or fall in the value of these commodities influences the price movements of the currency pair. Also, disparities in interest rates set by the Reserve Bank of Australia and the Fed affect the exchange rate.

USD/CAD

The ‘loonie’, as the US dollar-Canadian currency pair is otherwise known, is popular among professionals and beginner traders. The pair accounts for 5% of daily trade volumes in the Forex market. Like the other major pairs, the loonie is a good option for traders because of its high liquidity and better spreads. This makes it suitable for swing trading or day trading. The exchange rate of the USD/CAD is influenced mainly by crude oil prices, particularly Brent and US crude.

USD/CHF

The USD/CHF pair represents the US and Swiss economies. CHF stands for 'Confoederatio Helvetica' Franc, the only Franc still in circulation in Europe. The ‘Swissie’, as this pair is sometimes called, accounts for 5% of daily global trades. Traders choose this pair in times of increasing market volatility because they expect price drops as the Swiss franc gains against the dollar due to increased investment in the currency. However, it remains one of the least actively traded major pairs.

Major global FX trading sessions

While the Forex market remains the world's biggest, most liquid, and most volatile market, there are 4 Forex trading sessions:

• Sidney (Pacific Region): Active from 22.00 to 7.00 GMT

• Tokyo (Asian Region): Active from 23.00 to 9.00 GMT

• London (European session): Active from 8.00 to 17.00 GMT

• New York (American session): Active from 13:00 to 22.00 GMT

Each of the above trading sessions has its own level of liquidity and volatility. And this is what traders should watch out for when choosing the best Forex trading session to trade currency pairs. Based on this knowledge, the London and New York sessions seem to have a high volume of transactions. And this is because London New York has the highest volatility.

Below is a representation of trading activities during this session based on how busy the market gets when each session opens:

• London = 35%

• New York = 20%

• Tokyo = 6%

• Sidney = 4%

From the above data, London has the highest volume of transactions, followed by New York and Tokyo. Tokyo has just 6% because it is known to be a low-volatility Forex trading session, which is why many traders deter from trading when the Tokyo session opens. But that does not imply traders cannot generate profits trading during the Tokyo Forex market hours.

Importantly, there are no underdogs among all the Forex trading sessions if a trader understands how to approach each trading session. The best Tokyo session Forex pairs are among what a trader needs to participate in and profit from the Tokyo Forex market hours. Before we learn about the best pairs to trade during the Tokyo session, let's look at some key points about the session.

Tokyo session key takeaways

Generally, it is recommended that before a trader concludes a Forex trading session to trade, they do research about it. Learning about the various Forex pairs is also crucial if you want to trade only the best during a Forex session. So let us examine some of the most significant characteristics of the Tokyo Forex trading session, which is the article's main subject.

As previously mentioned, the Tokyo market is open from 8:00 a.m. to 6:00 p.m. local time. And because of the volume of trades that Tokyo banks facilitate, the Asian session starts when they are active. The economic hubs in Europe and the US are less active during this time. So there are records of low trading volumes because these major sessions are idle for the whole Tokyo session.

However, because only Asian liquidity is entering the market, this results in less volatility. But there are distinct entry and exit points, which can raise the likelihood of entering a profitable trade. The spot support and resistance levels during the Asian session are typically clear.

According to research, trading in Tokyo is challenging and slow compared to trading in Europe and North America. But the low volatility seen during the Tokyo session can be advantageous because it simplifies the management of trades. Because of the market's sluggish movement, traders can effectively analyze the market.

Furthermore, the Tokyo session overlaps with the opening of the London market at the end of the Asian session, adding to the liquidity. And this can be the best time to open positions. To profit from the Tokyo Forex trading session, traders need to know the best pairs and the best time to trade during the Tokyo session. These pairs are best for low-volatility markets and high spreads, which characterize the Tokyo session.

What is the best time to trade Forex in Tokyo?

A trader seeking the best time to trade Tokyo session Forex pairs must understand the Japanese time zone. The time zone in Tokyo is GMT+9, without daylight saving time. This is why when the Tokyo market opens at 23:00 GMT, in Japanese, it is 8: a.m. And when it closes at 9:00 GMT, it is 6:00 p.m. in Japanese local time.

However, traders should focus on the time of greatest liquidity when deciding when to trade Forex in Tokyo. And given that the Tokyo session is less active and volatile than other significant trading sessions, this typically occurs during the overlap of the two Forex trading sessions. A Forex trading session overlap refers to a period when two sessions are open simultaneously. And these periods are the busiest times during the trading day.

During the overlap between the Sydney and London sessions, the volatility and liquidity of the Tokyo session rise. So the best time to trade Forex in Tokyo is during these overlaps.

The Sydney/Tokyo overlap occurs between 23:00 and 7:00 GMT, and the Tokyo/London overlap occurs between 8:00 and 9:00 GMT. The overlap introduces a higher pip fluctuation as different traders trade simultaneously, which increases volatility.

This results in more liquidity, which reduces the likelihood of slippages. Additionally, there are greater odds of lower spreads on the currency pairs. But a trader who has this knowledge but does not know the best pairs to trade during the Tokyo session might lose out on trades. So what are the best Tokyo session Forex pairs?

Before you learn about the best pairs to trade during the Tokyo session, there are days with the most volatility and liquidity.

The best day to trade Forex

According to the report from TU's research department, the information reviewed regarding the days with the most volatility and increased liquidity is as follows:

The analyzed data shows that Wednesday is the most stable day for traders, while Thursday and Friday are the busiest days in terms of price volatility and liquidity. Traders must take into account the significant economic data points that are released before opening positions on Mondays.

If there is not much of it, the day is not active, and if there is a lot, then the activity and liquidity increase to a level similar to Tuesday and Wednesday. Based on the availability of reports and statistical data released in different countries, Thursday and Friday are the most liquid and volatile days of the week.

Expert Opinion

Igor Krasulya Author at Traders Union

The Tokyo session is often overlooked due to its lower volatility compared to other sessions. However, it should not be dismissed as an opportunity for traders and can be a good starting point for novice traders to get comfortable with market movements at lower risk. With less volatility comes smaller price fluctuations, allowing beginners to practice their analysis and trade management skills without as much pressure.

The best pairs like USD/JPY and AUD/USD tend to have very clear and identifiable support and resistance levels during the Tokyo session hours. This makes it easier for traders to identify potential entry and exit points for positions. Trading ranges are generally narrower as well, further reducing risk.

After gaining some experience you may move to the Tokyo/London session overlap that offers increased activity. This is a prime opportunity to open a position for holding during the higher-impact London hours.

Of course, the lower volatility also means profits may be modest during this session. But I recommend treating Tokyo hours as a learning experience. Master the basics like support/resistance and trade management in Tokyo, then apply those skills to higher volatility sessions for bigger rewards. It is a great learning laboratory for new strategies before taking them to more active markets.

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Team that worked on the article

Peter Emmanuel Chijioke

Contributor

Peter Emmanuel Chijioke is a professional personal finance, Forex, crypto, blockchain, NFT, and Web3 writer and a contributor to the Traders Union website. As a computer science graduate with a robust background in programming, machine learning, and blockchain technology, he possesses a comprehensive understanding of software, technologies, cryptocurrency, and Forex trading.

Having skills in blockchain technology and over 7 years of experience in crafting technical articles on trading, software, and personal finance, he brings a unique blend of theoretical knowledge and practical expertise to the table. His skill set encompasses a diverse range of personal finance technologies and industries, making him a valuable asset to any team or project focused on innovative solutions, personal finance, and investing technologies.

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Chinmay Soni

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Chinmay Soni is a financial analyst with more than 5 years of experience in working with stocks, Forex, derivatives, and other assets. As a founder of a boutique research firm and an active researcher, he covers various industries and fields, providing insights backed by statistical data. He is also an educator in the field of finance and technology.

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