What to Think of When Trading Currencies on Asian Markets

During the week, the forex market is available 24/7, making it an attractive option for traders who want access around the clock. Although it’s all trading the same market, forex is typically broken into three sessions: European, North American and Asian.

The Asian sessions are sometimes known as the Tokyo sessions, starting at 0000 GMT, and ending 0900 GMT, overlapping the London markets by an hour. However, trading Tokyo is more than just about being in a different time zone. Asian forex markets have their own unique features which you’ll need to be aware of if you want to max out your profits.

Qualities of the Asian Market

The forex market in Tokyo can be different to North American and European trading, so if you’re making the move for the first time, you might get caught unawares.

The main differences you’ll notice are less volatility and liquidity.

There is less liquidity in the Tokyo session, and this leads to lower levels of volatility too. As the primary liquidity entering the forex market is arriving from Asian, it’s less common to see the extreme peaks and troughs, which are characteristic of the forex market elsewhere. In particular, EUR/GBP, GBP/USD and EUR/USD are unlikely to break out of their current trading ranges.

All of this means that it’s easier to identify key resistance and support levels, as the market has less noise. If you want to trade with a breakout strategy, having clear bands makes movement easier to spot. Furthermore, professional companies such as CityIndex offering Forex trading solutions, make it their business to have all the functionality possible to make all these key indicators straightforward to identify and utilise.

As the Tokyo market starts to draw to a close and the London session opens, you can find a jump in volatility and liquidity. If there are going to be any breakouts or changes in support and resistance, this is the most likely time you’ll see it.

Relevant Data

Every market responds to the release of data, and the Tokyo session is no exception. Reports released monthly, quarterly or semi-annually can play a significant role in influencing volatility and price movement.

In the Asian markets, the economic data which is the most significant relates to Japan, China, Australia and New Zealand. From these, New Zealand and the Australian dollars will be the most vulnerable to data from China, especially manufacturing and trade.

To be able to forecast movement successfully, you’ll need to know when the following data is due to be released:

• GDP figures
• Unemployment
• Consumer price index
• Wage growth
• Consumer spending
• Consumer confidence
• Trade balance, imports and exports
• Business confidence
• Private sector PMIs
• Central Bank monetary decisions
• The release of minutes from Central Bank policy meetings
• Speeches from Central Bank members

Reports from the Federal Reserve and other major US data can also play a disproportionate role, particular for Japan. The yen is viewed as a safe-haven asset, so if there is greater instability in developed markets, money will be directed towards the yen.