Japanese Yen Futures Strategy (Example And Backtest)

Last Updated on December 5, 2022

The Yen is Japan’s official currency, denoted by the symbol, ¥, or the letters, JP or JPY. Regarded as a mainstay of global finance, the Japanese yen futures is one of the most actively traded FX futures. In fact, the Japanese yen is one of the four biggest reserve currencies. Want to know about the Japanese yen futures strategy?

The Japanese yen futures strategy refers to the methods and techniques used to trade the yen futures contracts. Japanese yen futures are financial derivative contracts whose underlying asset is the Japanese yen. It is a tradable agreement to receive or deliver a specified amount of Japanese yen at an agreed-upon exchange rate on a future date. Its pricing is based on the expected future exchange rate of the Japanese yen to the US dollar.

In this post, we answer some questions about the Japanese Yen futures strategy. Trading forex futures contracts is difficult, but we show a backtested strategy in this article.

What are Japanese Yen futures?

The Japanese yen futures contract is a contract in which the underlying currency is the Japanese Yen. A futures contract is an agreement to receive or deliver a specified amount of the underlying at an agreed-upon exchange rate on a future date.

The pricing of Japanese yen futures is based on the Japanese yen’s expected exchange rate to the US dollar. This contract allows traders to speculate on the yen’s value in relation to the USD, as well as hedge exchange rate risks. The CME offers the Japanese yen FX in full-sized, E-mini, and micro E-mini contract sizes to cater to its diverse clientele.

What is a Japanese Yen futures strategy?

This refers to the methodologies and techniques for trading this futures contract to make profits. It includes the traders’ strategies for market timing, leverage and position sizing, risk management, and other trade management techniques.

If you want to trade yen futures with any success, it is important to have a robust trading strategy with precise entry and exit signals, as well as reliable risk management parameters.

Japanese Yen futures strategy backtest

A backtest with strict trading rules, settings, statistics, and historical performance is coming soon.

What is the seasonality of Japanese Yen futures?

Seasonality in trading refers to the tendency of an asset’s price to move in a fairly predictable way during certain periods of the year. Most times, the periods referred to the months of the year.

The Japanese Yen futures have been noted to perform better during the months of May and October, as many traders often buy up the Japanese Yen during these months. However, the Yen performs poorly during the months of July and August, as can be seen in the chart below:

Japanese Yen futures strategy
Source: Seasonalcharts.com

What moves the Japanese Yen What affects the Japanese Yen the most?

The key factors that affect the movement of the Japanese Yen against the US dollar can be grouped into economic factors and political events. Some of the economic reports with the most significant effects on the movement of the Japanese Yen include interest rates and policy statements, Inflation-focused reports, Growth reports, the balance of payments reports, and more. Important political events, such as elections, significantly affect the Japanese yen futures.

How are Japanese Yen futures traded?

The Chicago Mercantile Exchange (CME) Group trades Japanese yen futures. The contract can be traded from anywhere in the world via the Globex electronic trading platforms from 5:00 p.m. CT to 4:00 p.m. CT the following day, with a one-hour break each day. The only exception is Friday when the market closes at 4:00 p.m. and reopens at 5:00 p.m. on Sunday.

One full contract of Japanese yen futures is worth 12,500,000 yen. The price quotation is in US dollars. In addition to the full contract, the Exchange offers mini contracts (6,250,000 yen) and micro contracts (1,250,000 yen). There are twenty months listed contracts with quarterly cycles (Mar, Jun, Sep, Dec).

Trading closes at 9:16 a.m. CT 2 business days (usually Monday) prior to the third Wednesday of the contract month. If the specified termination date falls on a bank holiday in Chicago or New York City, trading will be suspended on the next preceding business day, common to Chicago and New York City banks and the Exchange.

The contract is settled upon expiration by physical delivery of the specified amount of Japanese yen. This is usually done on the third Wednesday of the month in question. If that day is a bank holiday in either Chicago or New York City, or if it is not a business day in the country of delivery, the delivery will be made on the next business day in the country of delivery that is not a bank holiday in either Chicago or New York City.

How do you start trading Japanese Yen futures?

You trade the contract through a futures broker that can grant you access to the Exchange where the JPY/USD futures contract trades. The broker also helps to clear your trades. To start trading, you must register with a futures broker and fund your account.

You can also trade the CFD of futures contracts via an online CFD broker, such as IG. A CFD contract is a contract that exchanges the price difference between the opening and closing of a trade. It enables you to trade price fluctuations without worrying about the asset’s delivery issues involved in direct futures trading. If you want to trade CFDs, be sure to use a reliable broker.

What is the Japanese Yen trading at?

As of December 2nd, 2022, the Japanese Yen futures were trading at $0.0074605 per Yen. See the chart here on the CME platform chart. The chart was retrieved from TradingView.

Note that since the price changes from time to time, what is quoted here may not be the price it would be trading when you are reading this post. You can click on any of the links to get the real-time price on the CME platform chart or directly from TradingView.

What’s the Japanese Yen futures hour?

The Japanese Yen futures trades on the CME Globex electronic platform from Sundays to Fridays from 5:00 p.m. to 4:00 p.m. CT (6:00 p.m. – 5:00 p.m. ET) with a 60-minute break each day beginning at 4:00 p.m. (5:00 p.m. ET).

For CME ClearPort, the schedule is Sunday 5:00 p.m. – Friday 5:45 p.m. CT with no reporting Monday – Thursday 5:45 p.m. – 6:00 p.m. CT.

Where can I find trading charts?

You can find the trading chart on any trading platform you are using if it offers direct chart services. If your platform does offer charts, you can subscribe to trading charts via a third-party platform, such as MultiCharts.

A more common option is TradingView, which offers free access to charts of different instruments. However, to connect to your broker, you have to subscribe to the Pro services. You can also access the chart of the Japanese Yen futures via the CME platform.

You can also use the chart on Yahoo Finance.

What are the trading symbols for the Japanese Yen futures?

The trading symbol for the full contract is 6J. The product codes for the different services are as follows:

  • CME Globex: 6J
  • CME ClearPort: J1
  • Clearing: J1

What is the specification for Japanese Yen futures contract?

One contract is equivalent to 12,500,000 Japanese yen for the full Japanese Yen futures contract. So, the dollar value is obtained by multiplying it by the dollar exchange rate. The minimum price fluctuation on the Globex platform is as follows:

  • Outright fluctuation — $0.0000005 per JPY increment or $6.25 per contract
  • Consecutive months spread — $0.0000001 per JPY increment or $1.25 per contract
  • All other spread combinations — $0.0000002 per JPY increment or $2.50 per contract

The minimum fluctuation on the CME ClearPort is 0.0000001 per JPY increment, equivalent to $1.25 per contract.

Quarterly contracts (March, June, September, and December) are listed for 20 consecutive quarters, and serial contracts are listed for 3 consecutive months for full contracts. Settlement is by delivery method, and the last trading day is the second business day (usually Monday) before the third Wednesday of the contract month.

Why should you start trading Japanese Yen futures?

There are many reasons to play the Japanese yen futures market: Investors, fund managers, and any business person, who is exposed to Japanese yen exchange rate risks, may use the Japanese yen futures to hedge their exposure to the market. The Japanese yen futures contract also offers a great opportunity for speculation.

Other traders may also use the Japanese Yen futures for arbitrage trading, which allows them to benefit from any price imbalances.

What is the contract size?

For the full or standard contract size of the Japanese Yen futures, one contract is equivalent to 12,500,000 Japanese yen. To get the USD value of the contract, you multiply it by the JPY/USD exchange rate. For example, with the JPY/USD exchange rate at $0.0074605, the USD value of one full contract of the Japanese Yen future would be 12,500,000 x 0.0074605 = $93,256.25.

What is the tick size?

The tick size is the USD worth of the minimum fluctuation per contract. For one full contract of the Japanese Yen futures, the tick size is $6.25 per tick per contract on CME Globex and $1.25 on the CME Clearpot platform.

What is the minimum price fluctuation for Japanese Yen futures?

The Globex platform’s minimum fluctuation is 0.0000005 per JPY increment (equivalent to $ 6.25 per contract tick size). The consecutive months spread is 0.0000001 per JPY increment or $1.25 per contract, while all other spread combinations use 0.0000002 per JPY increment or $2.50 per contract. On CME ClearPort, the minimum fluctuation is 0.0000001 per JPY increment, which is equivalent to $1.25 per full contract size.

Are there any ETFs?

Yes. Many ETFs track the Japanese Yen. They include the following:

  • Invesco Currencyshares Japanese Yen Trust (FXY)
  • ProShares UltraShort Yen (YCS)
  • ProShares Ultra Yen (YCL)

What factors affect Japanese Yen prices?

So many factors impact the price of the Japanese yen. The key factors include the following:

  • Interest rates and policy statements
  • Inflation-focused reports, such as the consumer price index and the producers’ price index
  • Growth reports, such as the GDP, manufacturing PMI, services PMI, and retail sales
  • Reports about the balance of payments, such as current account and trade balance reports
  • Sentiment reports, such as the German Zew Economic Sentiment Index
  • Important political events, such as elections

What is the all-time high for Japanese Yen futures?

According to the chart on Tradeview, the all-time high for the Japanese Yen against the US dollar is $0.0132640 per yen, which was reached in October 2011.

What are the biggest risks in trading Japanese Yen futures?

The biggest risk of trading futures, including Japanese Yen futures, is adverse price movements. Because it is a leveraged instrument, the losses are calculated using the actual value of the contract size traded and subtracted from what is in your account. So, if you trade with a 20x leverage, a 1% negative movement results in a 20% loss in your account, while a 5% adverse movement would result in a 100% loss.

What is the settlement method?

The settlement method is deliverable.

What is the settlement procedure?

The settlement procedure involves the physical delivery of Japanese Yen. But there are normal daily settlements until Rollover Date. CME Group staff determines the daily settlement of JPY/USD futures (6J) at 14:00 Central Time (CT) based on trading activity on CME Globex.

What is the block minimum for Japanese Yen futures?

150 Contracts for quarterly contracts and 20 contracts for monthly contracts

What is the difference between Japanese Yen futures and Forex for the Japanese currency?

The major difference is that the spot forex value for the Japanese Yen is determined in relation to the spot value of the USD, whereas the Japanese Yen futures is priced independently. Also, while the futures contracts have fixed expiration dates, the spot forex pair can be traded indefinitely.

Which forex pair is the same as Japanese Yen futures

USD/JPY, which is the inverse of the futures contract.

What are some important dates for this market?

The important dates include:

  • 1871 when the Meiji government officially adopted the “yen” as Japan’s modern unit of currency under the New Currency Act of 1871.
  • 1973 when the government first allowed the currency to float
  • April 1995 when the Yen hit a peak of under 80 yen/US$, temporarily making Japan’s economy nearly the size of that of the US.

What is the highest Japanese Yen has ever been its all-time high?

According to the chart on Tradingview, the highest level the Japanese yen ever reached against the US dollar is $0.0132640 per yen, which happened in October 2011.

What is the lowest Japanese Yen has ever been its all-time low?

According to the Tradingview chart for Japanese Yen futures, the lowest the Japanese Yen has ever been is $0.0066295 per yen, which it reached in October 2022.

Conclusion

The Japanese Yen Futures Strategy allows traders to take a position on the Japanese yen against the US dollar, which can be for speculation or to hedge exchange rate risks.

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