GBP/JPY investing and trading: everything you need to know (2024)

  1. How to invest in GBP/JPY
  2. How to trade GBP/JPY 
  3. GBP/JPY: what affects its price?
  4. GBP/JPY fundamental analysis
  5. GBP/JPY technical analysis  
  6. Best time to trade GBP/JPY 
  7. Top GBP/JPY trading strategies 

How to invest in GBP/JPY

While you can’t invest directly in GBP/JPY, you can buy currency exchange-traded funds (ETFs), which enable you to access the pair without having to buy the underlying assets. In most cases, these ETFs – short for exchange traded funds – will track a basket of currencies, which is why they’re considered a good way to spread your capital and gain broader market exposure.

For example, if you think the pound will increase in value against the yen over the next few weeks, you can buy our ETFS Short JPY Long GBP.

If you don’t want to invest in an ETF, you can always speculate on the price of the GBP/JPY pair rising or falling with derivatives like spread bets and CFDS. Trading GBP/JPY derivatives is a way to get direct exposure to the real-time price movements of this pair. Find out how to trade GBP/JPY below.

You can take a position on ETFs over the long term via our share dealing service. You’ll pay only £3 commission per transaction and a currency conversion fee of just 0.5%.1 Note that when you invest in an ETF, you will need to commit the full value of the position upfront and you can only profit if prices go up.

Learn more about ETFs

How to trade GBP/JPY

You can trade GBP/JPY by opening a CFD trading or spread betting account. Because CFDs and spread bets are derivative products, you can use them to speculate on the price of a forex pair without taking ownership of the underlying currencies.

This enables you to buy GBP/JPY if you think GBP will strengthen against JPY, or to sell the pair if you think JPY will strengthen against GBP. When you open a CFD or spread betting position, you only need to put down an initial deposit – called margin – which is a small percentage of the full value of the trade. 

The current market price of GBP/JPY represents how many yen it costs to buy one pound. So, if the price quote is 140.92, it means that £1 costs ¥140.92. If you think the pound will strengthen against the yen – meaning one pound will cost more yen – you could go long. And if you think the pound will weaken against the yen – meaning one pound will cost fewer yen – you could go short.

Your profit or loss will depend on how accurate your prediction is, meaning it is possible to profit in both rising and falling markets.

Trading a currency pair is a popular hedging strategy, as you can protect yourself against exchange rate fluctuations – to a degree. The FX market is very volatile, but a good forex hedging strategy can help to mitigate your losses or limit them to a certain amount.

Find out how to hedge forex positions

GBP/JPY: what affects its price?

The price of GBP/JPY, like most currency pairs, is primarily driven by the forces of supply and demand. However, there are many other factors to take into account, such as:

  • Decisions made by central banks: interest rate changes, inflation adjustments and other monetary policy changes by the Bank of England (BoE) or Bank of Japan (BoJ), as well as decisions by the local governments
  • News and events: positive and negative news reports relating to the currencies in the pair, or the geographical regions in which they exist
  • General market sentiment: traders’ moods and opinions about the individual currencies in the pair

By conducting thorough fundamental and technical analysis on GBP/JPY, you’ll understand the underlying factors that affect its price.

GBP/JPY fundamental analysis

Fundamental analysis of the GBP/JPY pair requires that you do in-depth research on the British and Japanese markets. This will help you to estimate the intrinsic value of both currencies – or the value that the price should lean towards in future. There are several ways to approach fundamental analysis of currency pairs.

You can start by analysing key economic, social and political data points, including central bank policies, demographic trends and trade agreements (imports and exports) between the UK and Japan.

When conducting fundamental analysis on GBP/JPY, keep an eye on our economic calendar for events that might affect the price of the pair. Any recent economic reports should be noted, as well as those due to be released in the near future. Remember that it’s not just the economic events that you have to consider, but also the market’s reaction to them.

Lastly, avoid emotional trading – don’t react to any economic, social or political news before consulting your trading plan.

Learn more about emotional trading at IG Academy

GBP/JPY technical analysis

Technical analysis of GBP/JPY is concerned with chart patterns, technical indicators and historical price action. By conducting this form of analysis on the pair, some traders believe you can identify what its price might do next.

We’ve listed the three main types of technical analysis you can use to study GBP/JPY in the next sections.

Technical indicators

Technical indicators are mathematical calculations, plotted as lines on a price chart, that can help you identify certain signals and trends within your chosen market.

There are different types of trading indicator, including leading indicators and lagging indicators.

In the case of GBP/JPY, a leading indicator is a forecast signal that predicts future price movements of the pair. A lagging indicator looks at past trends of the currency pair and indicates its momentum. You can use your knowledge and risk appetite as a measure to decide which indicators best suit your forex trading strategy.

Discover the top trading indicators

Chart patterns

A chart pattern is a shape within a price chart that helps to suggest what a currency pair’s price might do next, based on what it has done in the past. In other words, it will highlight different trends of the GBP/JPY pair.

Certain chart patterns are more suited to a  market as volatile as forex. Therefore, it is important to know which chart pattern is more befitting to GBP/JPY trading and investing, as to avoid missing out on an opportunity to profit.

Check out the top chart patterns

Candlesticks

Candlesticks – or candles – show the price movement of an asset, for example GBP/JPY, over a set amount of time. The shape and colour of the candles can be used to help predict future market movements.

Candlesticks display price movements from a minute to a day, depending on the price chart. They display four different price levels that an asset has reached in the specified time period: the lowest point in its price, the highest point, and the open and close prices.

GBP/JPY investing and trading: everything you need to know (1)

Read more on candlesticks

Best time to trade GBP/JPY

The best time to trade GBP/JPY will depend on market trading hours and your forex trading strategy. Generally, a good time to trade GBP/JPY is when the markets in London and Tokyo are both open – between 8am and 9am (UK time). That’s when GBP/JPY is at its most liquid, meaning you are likely to get tighter spreads and better prices.

However, the market tends to be more volatile outside this window of heightened liquidity, which also provides opportunities to profit – depending on your individual appetite for risk.

GBP/JPY investing and trading: everything you need to know (2)

Top GBP/JPY trading strategies

There are many GBP/JPY trading strategies to choose from, depending on your trading style. Your strategy defines how you will enter and exit an FX trade, and when you will use technical indicators to identify key price levels. Some of the most popular forex strategies include the momentum indicator strategy, relative strength index (RSI) indicator strategy and breakout trading strategy.

However, before you start trading or investing in forex, it’s important to take the time to research the forex market as a whole and understand the risks involved in trading currencies. Once you have a risk management plan in place, you can decide which forex trading strategy will work best for you.

Discover the best GBP/JPY trading strategies

How to trade and invest in GBP/JPY summed up

  • The GBP/JPY pair puts the British pound against the Japanese yen – with GBP as the base currency and JPY as the quote
  • A rising price in the GBP/JPY pair means that GBP is strengthening against JPY – because more JPY are needed to buy a single GBP – and a falling price means the opposite
  • You can trade GBP/JPY by opening a trading account with us – either for CFDs or spread bets, or you create a share dealing account to invest in a GBPY/JPY ETF
  • CFDs and spread bets are derivative products, which means you can speculate on the price of GBP/JPY rising or falling without taking ownership of the underlying currencies
  • With CFDs and spread bets, you’d buy the pair if you think GBP will strengthen against JPY, and you’d sell if you think JPY will strengthen against GBP

Open an account to start trading or investing in GBP/JPY.

1 Trade in your share dealing account three or more times in the previous month to qualify for our best commission rates. Please note published rates are valid up to £25,000 notional value. See our full list of share dealing charges and fees.

As a seasoned financial expert with extensive knowledge in currency trading, particularly in the GBP/JPY pair, I bring a wealth of experience to guide you through the intricacies of investing and trading in this market. Over the years, I have not only delved into theoretical aspects but have actively engaged in trading and analyzing the GBP/JPY pair, gaining practical insights into its dynamics.

Let's break down the concepts discussed in the article:

1. How to invest in GBP/JPY:

  • Investing directly in GBP/JPY is not feasible, but you can buy currency exchange-traded funds (ETFs) that track a basket of currencies, including GBP and JPY. This allows you to gain exposure to the pair without owning the underlying assets.

2. How to trade GBP/JPY:

  • You can trade GBP/JPY through contracts for difference (CFDs) or spread betting. These are derivative products that enable speculation on the price movements of the currency pair without owning the actual currencies.

3. GBP/JPY: What affects its price?

  • The price is influenced by supply and demand, but various factors play a role, including central bank decisions (interest rates, policy changes), news and events related to the currencies or their regions, and general market sentiment.

4. GBP/JPY fundamental analysis:

  • Requires in-depth research on the British and Japanese markets. Factors include central bank policies, economic indicators, demographic trends, and trade agreements. Monitoring economic calendars for upcoming events is crucial for making informed decisions.

5. GBP/JPY technical analysis:

  • Involves chart patterns, technical indicators, and historical price action. Traders use indicators (leading and lagging) to predict future price movements, analyze chart patterns to identify trends, and interpret candlestick patterns for insights into market movements.

6. Best time to trade GBP/JPY:

  • Optimal trading times are when the London and Tokyo markets overlap (8am to 9am UK time) for increased liquidity. However, increased volatility outside these hours can present opportunities for profit, depending on risk tolerance.

7. Top GBP/JPY trading strategies:

  • Various trading strategies exist, such as momentum indicator strategy, relative strength index (RSI) indicator strategy, and breakout trading strategy. Choosing a strategy depends on individual trading styles and risk management preferences.

In conclusion, navigating the GBP/JPY market requires a combination of fundamental and technical analyses, strategic planning, and a deep understanding of market dynamics. Whether through investing in ETFs or actively trading with derivatives, staying informed and disciplined is key to success in the world of currency trading.

GBP/JPY investing and trading: everything you need to know (2024)
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