Asian (Tokyo) Forex Market Session

The operations of the Forex currency market in Asia are carried out in the main financial centers of that region during the Asian trading session, also known as the Asian session (hours: 7 p.m. to 4 p.m. EST). During this session, Tokyo has the largest share of the market, followed by Hong Kong and Singapore. Today, Tokyo is one of the main centers of financial transactions not only in Asia but globally. It is the first major financial market to open during the day, and many large market players regularly use the pace of the negotiations that take place there as a reference to determine the dynamics of the market at that time, as well as to develop their own strategies. negotiation. During the Asian session, the trading volume can sometimes be low, however this period is known as a space in which large investors such as hedge funds and the most important investment banks carry out the execution of significant stops and option barriers.

The following figure shows a list of the main currency pairs and their average ranges of price movement during the Asian session:

Asian session (7 pm – 4 am EST)

Note: The data shown in the table above correspond to the period 2002-2004. Despite being outdated, the trend in the general behavior of the main currency pairs in that period is still present and can be extrapolated (to a certain extent). However, there may be some discrepancy as the market is dynamic and constantly changing. As far as possible I will try to include updated data in the table above to obtain a more precise analysis of the behavior of these currency pairs during the Asian session.

Source: Daily Trading on the Foreign Exchange Market by Kathy Lien

As we can see, during this period the movement of currency pairs was not very significant compared to other market sessions, although opportunities always arise. Generally speaking, this session is relatively quiet and therefore it is not the most suitable for traders who expect to obtain high profits with long and fast movements of the prices, as it happens in the European session or the American session for example.

Summary of the general characteristics of the Asian session

• During this period, the action is not limited solely to the markets of Japan. A large volume of transactions are made in other major financial centers in the region such as Sydney, Australia and Singapore.
• The main market participants during the Asian session are trading companies (exporters) and central banks among others. It must be remembered that Japan’s economy depends heavily on exports and this country is one of the largest exporters today, which together with the fact that China is also one of the largest commercial players in the world (and markets in China are more active in that period), causing a strong volume of transactions to occur daily in Asian markets every day.
• Despite what was stated in the previous point, liquidity can sometimes be low during the Asian session. Therefore, for the trader there will be times when it will be difficult to find good opportunities in the market since there will be few movements and the conditions will not be the best. Basically, trading during this period can be like going fishing – the trader may have to wait a long time before getting his prize.
• Over the course of the Asian session, stronger price movements are more likely to occur in currency pairs with Asian-Pacific currencies such as GBP / JPY, EUR / JPY, AUD / USD and NZD / USD, unlike the currency pairs that do not include these currencies, such as the EUR / USD, which have a rather calm behavior.
• During periods of low liquidity in the Asian session, most pairs remain within a price range. This condition offers interesting opportunities for short-duration day trading or range breakout operations in the course of the next market session (European session), when there is a significant increase in market liquidity.
• Typically, most of the action and major movements in this period occur at the beginning of the session, when more economic data is released.
• Movements in the Asian session can set the tone for the remainder of the trading day. Many traders during the following sessions analyze what has happened during the Asian session in order to organize themselves and evaluate which strategies they should apply in the other periods.
• Typically, after big moves occur in the previous American session, a consolidation in price action forms during the Asian session. When this occurs, the quotes of currency pairs move in narrow price ranges from which significant breakout movements can be generated.

What are the most recommended currency pairs during the Asian session?

With the biggest news from Japan, Australia and New Zealand released during the Asian session, this period presents good opportunities to trade based on market news events. Also, there can be quite a lot of movement in the yen currency pairs like GBP / JPY or EUR / JPY, as a large number of yen change hands as Japanese companies conduct most of their business to these. hours.

It should also be taken into account that China is now a super economic power, and therefore any important news that comes from that country can create volatile movements in the market. Since Japan and Australia are highly dependent on demand from China, we may see big moves in the AUD and JPY pairs when major events or indicators are announced from that country.

For traders who have greater tolerance for risk, currency pairs such as GBP / JPY, USD / JPY or GBP / USD are good options during the Asian session as they have wide price ranges, which allow traders short-term obtain high profits in a short time thanks to movements of the order of 90 pips or more. During this period, large institutional investors and foreign investment banks, which have most of their assets in US dollars, produce a significant amount of transactions in USD / JPY each time they enter the stock and exchange markets. Japan bonds. In turn, the Central Bank of Japan, which has in its possession more than 800 billion dollars of the debt of the United States Treasury, plays an important role that significantly influences the demand and supply of the USD / JPY due to its transactions in the open market.

In addition, another important and well-known aspect is that Japan’s large exporters use the trading hours of the Tokyo market to bring their foreign earnings back home, which intensifies the fluctuations of the yen currency pairs. Pairs like GBP / JPY, EUR / JPY and GBP / CHF experience great volatility as central banks and other major market players begin to position themselves in preparation for the European session.

For traders who are more risk-averse, currency pairs such as AUD / JPY, EUR / USD and EUR / CHF are suitable options during the Asian session, since they present less volatility and therefore allow Medium and long-term investors analyze fundamental factors when making a decision regarding their operations. The relatively moderate volatility of these currency pairs helps protect traders and their trading strategies from exposure to unexpected and irregular market movements that often occur due to speculative trades that occur throughout the trading day. In other words, they are more suitable pairs to carry out transactions in the medium and long-term market in the course of this session.