EUR/JPY

The euro/yen currency pair refers to the exchange rate of euros to yen, that is, how many yen can be bought with one euro. This currency pair is an important trading object on the global Forex market because it involves two countries with huge economies: the European Union and Japan. The trend of the EUR/JPY currency pair is affected by many factors, including the economic performance of the two countries, trade relations, political situation, monetary policy, risk appetite, etc.

How to Check the EUR/JPY Exchange Rate

The exchange rate for the EUR/JPY currency pair can be calculated in different ways, one of the common methods is by utilizing cross rates. The so-called cross exchange rate refers to the price relationship between two different currencies. The currency exchange between two countries is calculated using their respective exchange rates against the US dollar. For example, if one U.S. dollar can be exchanged for 0.9122 euros and 113.565 yen respectively, the cross exchange rate of euro against yen is 124.50 (= 113.565/0.9122).

The exchange rate of the Euro/Japanese yen currency pair can also be known by checking the real-time exchange rates or posted exchange rates provided by major banks or websites. For example, according to the exchange rate announced by the Bank of Taiwan during non-business hours on June 17, 2023, one euro can be exchanged for NT$33.315 to 33.915 New Taiwan dollars, and one yen can be exchanged for NT$0.2143 to 0.2193 New Taiwan dollars. The posted exchange rate of the euro against the yen is 152.86 to 155.19. (= 33.315/0.2193 to 33.915/0.2143).

How to Invest in EUR/JPY?

EUR/JPY is a highly liquid and volatile currency pair that reflects the economic relationship between the Eurozone and Japan. Investors can trade or invest in this currency pair in different ways, such as the foreign exchange market, futures market, options market or exchange-traded funds (ETFs). Here are some methods and strategies for investing in the EUR/JPY currency pair:

1. Forex Market

The foreign exchange market is the largest and most active financial market in the world, with a daily transaction volume of more than 6 trillion US dollars. In the foreign exchange market, investors can buy and sell different currency pairs, including EUR/JPY, through online platforms or brokers. The advantages of the Forex market are that it has high liquidity, low latency, low costs and high leverage. The disadvantages of the foreign exchange market are that it is highly risky, volatile and irregular. Investors need to pay attention to the following factors when trading EUR/JPY:

• Fundamental analysis: Fundamental analysis refers to the analysis of economic, political and social factors that affect the value of a currency, such as interest rates, inflation, trade balance, policy changes, etc. Generally speaking, if the economic performance of the Eurozone is better than that of Japan, or the European Central Bank's monetary policy is looser than that of the Bank of Japan, then EUR/JPY will rise; conversely, if Japan's economic performance is better than that of the Eurozone, or the Bank of Japan's If monetary policy is tighter than the ECB's, EUR/JPY will fall.

• Technical Analysis: Technical analysis refers to the use of charts, indicators, and patterns to predict currency movements and identify trading opportunities. Some commonly used technical tools include trend lines, support and resistance levels, moving averages, Bollinger Bands, Relative Strength Index (RSI), Moving Average Convergence Divergence (MACD), etc. Investors can choose the appropriate technical tools and strategies based on their style and time frame.

• Psychological analysis: Psychological analysis refers to considering the impact of market participants' emotions, confidence and expectations on currency prices. Some commonly used psychological tools include news events, market rumors, investor sentiment index, etc. Investors need to pay attention to psychological biases such as panic, greed, overconfidence or group effects that may exist in the market, and remain calm and rational.

2. Futures Market

The futures market is a contract-based financial market where investors can buy or sell currency pairs at a certain time and price in the future through an exchange or clearing house, such as EUR/JPY futures. The advantage of the futures market is that it has high transparency, standardization and margin system. The disadvantages of the futures market are that it has high transaction costs, time constraints and market depth. Investors need to pay attention to the following factors when trading EUR/JPY futures:

• Futures price: Futures price refers to the market price of a currency pair at a certain time and price in the future. It is determined by factors such as supply and demand, interest rate differences and expected changes. Generally speaking, if the futures price of EUR/JPY is higher than the spot price, it means that the market expects EUR/JPY to rise; conversely, if the futures price of EUR/JPY is lower than the spot price, it means that the market expects EUR/JPY to fall.

• Option rights: Option rights refer to the right of investors to choose to execute or abandon the contract when trading futures contracts. Generally speaking, if investors believe that the EUR/JPY will rise, then they can buy a call option, which gives them the right to buy the EUR/JPY at an agreed price in the future; conversely, if investors believe that the EUR/JPY If the yen will fall, then they can buy a put option, which gives them the right to sell EUR/JPY at an agreed price in the future.

• Trading strategy: Trading strategy means that investors can use different combinations and operations to increase returns or reduce risks when trading futures contracts. Some commonly used trading strategies include one-way trading, arbitrage trading, hedging trading, long-short combinations, etc. Investors can choose a suitable trading strategy based on their goals and risk tolerance.

3. Options Market

The options market is a contract-based financial market where investors can buy and sell rights to a currency pair at a certain time and price in the future through an exchange or clearing house, such as EUR/JPY options. The advantage of the options market is its high flexibility, diversity and innovation. The disadvantages of the options market are its high level of complexity, uncertainty, and time value decay. Investors need to pay attention to the following factors when trading EUR/JPY options:

• Option value: Option value refers to the market price of the right to a currency pair at a certain time and price in the future. It consists of two parts: intrinsic value and time value. Intrinsic value refers to the profit that an investor can make if the contract is executed immediately; time value refers to the possibility and value of the option being executed in the future. Generally speaking, if the option value of EUR/JPY is higher than the intrinsic value, it means that the market expects EUR/JPY to fluctuate significantly; conversely, if the option value of EUR/JPY is lower than the intrinsic value, it means that the market expects EUR/JPY to fluctuate significantly. Stable or slightly fluctuating.

• Option factors: Option factors refer to the five main factors that affect the value of options, namely underlying price, exercise price, expiration time, volatility and risk-free interest rate. Generally speaking, if the price of the underlying asset of EUR/JPY rises or the strike price decreases, the value of the call option will increase and the value of the put option will decrease; conversely, if the price of the underlying asset of EUR/JPY falls or the strike price rises , then the value of the call option will decrease and the value of the put option will increase. If EUR/JPY lengthens expiration or volatility increases, all options types increase in value; conversely, if EUR/JPY shortens expiration or reduces volatility, all options types decrease in value. If the risk-free interest rate rises, the value of the call option will increase and the value of the put option will decrease; conversely, if the risk-free interest rate decreases, the value of the call option will decrease and the value of the put option will increase.

• Trading strategy: Trading strategy refers to the different combinations and operations that investors can use to increase returns or reduce risks when trading options contracts. Some common trading strategies include buying or selling a single option, buying or selling multiple options with different strike prices or expiration times (such as vertical, horizontal, or diagonal spreads), buying or selling simultaneously Two options with the same strike price and expiry time but different directions (such as long, double bottom, collar or butterfly spread), buy or sell options with the same strike price and expiry time but different underlyings Two options (such as a straddle), etc. Investors can choose a suitable trading strategy based on their goals and risk tolerance. 

4. Exchange Traded Funds (ETFs)

An exchange-traded fund is an investment vehicle that tracks the performance of an index, industry, commodity or currency and can be bought and sold on a stock exchange, just like stocks. Investors can indirectly invest in this currency pair by buying and selling ETFs that track the trend of Euro/Yen, such as Euro/Yen Currency Trust (FXE) or Japanese Yen/Euro Currency Trust (FXY). The advantages of ETFs are their high convenience, transparency and diversity. The disadvantages of ETFs are that they have high management fees, tracking error and liquidity risk. Investors need to pay attention to the following factors when trading the EUR/JPY ETF:

• ETF price: ETF price refers to the market price of ETFs that track the trend of EUR/JPY. It is determined by factors such as supply and demand, net asset value (NAV), and premium or discount. Generally speaking, if EUR/JPY rises, ETFs tracking EUR/JPY will rise; conversely, if EUR/JPY falls, ETFs tracking EUR/JPY will fall.

• ETF components: ETF components refer to the portfolio of assets held by ETFs that track the trend of the euro/yen. It is composed of cash, futures contracts, options contracts or other financial instruments in different proportions. Investors need to understand an ETF's composition and weightings and how they affect the ETF's performance and risk.

• ETF strategy: ETF strategy refers to the different ways investors can use to increase returns or reduce risks when trading ETFs. Some commonly used ETF strategies include long-term holding, short-term trading, long-short operations, arbitrage operations, hedging operations, etc. Investors can choose an appropriate ETF strategy based on their goals and risk tolerance.

Conclusion

EUR/JPY is a highly liquid and volatile currency pair that reflects the economic relationship between the Eurozone and Japan. Investors can trade or invest in this currency pair in different ways, such as the foreign exchange market, futures market, options market, or exchange-traded funds. Each method has its advantages, disadvantages and risks, and investors need to choose the appropriate method and strategy based on their own knowledge, experience and preferences. Investors also need to pay attention to the various factors affecting the trend of EUR/JPY, such as fundamentals, technical aspects and psychological aspects, and remain vigilant and learn.