The Tokyo session, also known as the Asian session, runs from 12:00 AM to 9:00 AM GMT. It is one of the quieter trading periods in the forex market, but it offers unique opportunities for trading currency pairs tied to the Asia-Pacific region. The best pairs to trade during this session are those involving the Japanese yen (JPY), Australian dollar (AUD), and New Zealand dollar (NZD) due to their regional activity and relevance to economic developments in Asia.

Characteristics of the Tokyo session

• Lower volatility: Compared to the London or New York sessions, the Tokyo session typically exhibits lower volatility, making it ideal for range-bound trading strategies.
• Moderate liquidity: Liquidity is moderate, particularly for currency pairs tied to the Asia-Pacific region, while other major pairs may see reduced activity.
• News-driven opportunities: Economic data from Japan, Australia, and New Zealand often creates localized spikes in volatility.
• Overlap with Sydney session: The Tokyo session overlaps with the end of the Sydney session, adding slight momentum in AUD and NZD pairs.

Best pairs to trade during the Tokyo session

1. USD/JPY

• Why it’s active: As Japan’s primary currency pair, USD/JPY sees consistent activity during the Tokyo session. Traders respond to Japanese economic data, Bank of Japan (BOJ) announcements, and global risk sentiment.
• Characteristics: Volatility tends to increase when Japanese equities or bond yields fluctuate.
• Trading opportunities: Ideal for trend-following or breakout strategies during news releases.

2. AUD/JPY

• Why it’s active: This pair combines the Japanese yen’s safe-haven status with the Australian dollar’s risk-sensitive nature. It reflects global risk sentiment and Asian market activity.
• Characteristics: Highly influenced by commodity prices and equity market performance in Asia.
• Trading opportunities: Suitable for trading reversals or trends triggered by regional news or commodity price changes.

3. EUR/JPY

• Why it’s active: EUR/JPY is sensitive to European developments and Japanese market movements. Its activity during the Tokyo session is often driven by sentiment carried over from the European session.
• Characteristics: Tends to exhibit clear technical patterns, such as support and resistance levels.
• Trading opportunities: Best for range trading during quieter periods or breakout trades on news-driven volatility.

4. AUD/USD

• Why it’s active: The Australian dollar is heavily traded during the Tokyo session due to Australia’s close economic ties with Asia. AUD/USD is also influenced by commodity prices and Chinese economic data.
• Characteristics: Moderate volatility with opportunities to trade both ranges and trends.
• Trading opportunities: Effective for scalping or trading news related to Australia or China.

5. NZD/USD

• Why it’s active: New Zealand’s economic releases and trade links with Asia make NZD/USD active during the Tokyo session.
• Characteristics: Similar to AUD/USD, but with slightly lower liquidity and potentially wider spreads.
• Trading opportunities: Focus on trading ranges or reacting to New Zealand-specific news, such as dairy price reports or Reserve Bank of New Zealand (RBNZ) statements.

6. AUD/NZD

• Why it’s active: This pair reflects the economic dynamics between Australia and New Zealand. It is highly sensitive to relative economic performance and central bank policies in the two countries.
• Characteristics: Low volatility, making it suitable for range-bound strategies.
• Trading opportunities: Ideal for traders seeking consistent price movements without extreme volatility.

7. GBP/JPY

• Why it’s active: GBP/JPY is influenced by carry trade activity and global risk sentiment, making it moderately active during the Tokyo session.
• Characteristics: Volatility can spike if significant UK or Japanese news is released.
• Trading opportunities: Suitable for breakout strategies during volatile periods and range trading during quieter times.

Factors influencing Tokyo session currency pairs

• Japanese economic data: Data releases such as GDP, inflation, and BOJ policy updates can drive JPY volatility.
• Asian equity markets: Fluctuations in indices like the Nikkei 225 and Hang Seng often influence JPY pairs.
• Commodity prices: AUD and NZD pairs are sensitive to movements in commodities like gold, iron ore, and dairy products.
• Chinese economic developments: Given China’s economic ties with Australia and New Zealand, data such as trade figures or industrial production affects AUD and NZD pairs.
• Risk sentiment: The yen’s status as a safe-haven currency makes it reactive to shifts in global risk appetite.

Strategies for trading during the Tokyo session

1. Range trading

• Identify key support and resistance levels for pairs like USD/JPY or AUD/JPY.
• Use oscillators like RSI or Stochastic to confirm overbought or oversold conditions.

2. News trading

• Monitor economic calendars for scheduled data releases in Japan, Australia, and New Zealand.
• Trade in the direction of the initial momentum following a significant data surprise.

3. Scalping

• Focus on high-liquidity pairs like USD/JPY or AUD/USD.
• Use shorter timeframes (e.g., 1-minute or 5-minute charts) to capture small price movements.

4. Trend-following during breakouts

• Look for breakout opportunities in AUD/JPY or EUR/JPY during periods of increased volatility, such as after major news releases.
• Confirm trends using Moving Averages or Bollinger Bands.

FAQs

Why is the Tokyo session important in forex trading?
The Tokyo session marks the start of the Asian trading day, setting the tone for currencies tied to the Asia-Pacific region.

Which pairs are best to trade during the Tokyo session?
USD/JPY, AUD/JPY, EUR/JPY, AUD/USD, and NZD/USD are the most active pairs due to their regional significance.

How does volatility compare to other sessions?
The Tokyo session is less volatile than the European or North American sessions, making it ideal for range trading.

Why are AUD and NZD pairs active during the Tokyo session?
Australia and New Zealand have close economic ties with Asia, and their currencies are influenced by regional trade, commodity prices, and Chinese economic data.

Should I trade exotic pairs during the Tokyo session?
It’s better to focus on major or cross pairs during the Tokyo session, as exotic pairs may experience wider spreads and lower liquidity.

How does risk sentiment affect Tokyo session trading?
Risk sentiment influences JPY pairs, with the yen strengthening in risk-off scenarios and weakening in risk-on environments.

What role do commodity prices play in the Tokyo session?
Commodity-linked currencies like AUD and NZD are highly sensitive to changes in commodity prices, which often move during the Tokyo session.

Is the Tokyo session suitable for beginners?
Yes, the Tokyo session’s lower volatility makes it a good starting point for beginners, particularly with range-trading strategies.

What economic data impacts the Tokyo session?
Japanese inflation, GDP, and BOJ statements, as well as Australian and New Zealand employment and trade data, influence the Tokyo session.

How can I manage risks during the Tokyo session?
Trade smaller position sizes, focus on liquid pairs, and use stop-loss orders to manage risks effectively.

Conclusion

The Tokyo session offers unique trading opportunities, particularly for currency pairs tied to the Asia-Pacific region, such as USD/JPY, AUD/JPY, and AUD/USD. With its moderate liquidity and lower volatility compared to other sessions, it is ideal for range trading and news-driven strategies. Understanding the session’s dynamics and focusing on active pairs allows traders to capitalize on the opportunities it presents while managing risks effectively.