As London Opens, Yen Buyers Reflect Risk Appetite
The London forex session often sets the tone for risk sentiment. Yen buyers stepping in early signal risk-off mood. Safe-haven demand for JPY rises when equities fall or uncertainty grows. This reflects trader caution. Plenty of yen buying across the complex as risk sentiment weakens following the reaction to the overnight news of progress in finding a vaccine for COVID-19 and displayed clearly on the currency array indicator in multiple timeframes. Risk currencies are much in evidence and one of the many key topics I cover in the complete forex education program which you can find here at https://quantumtradingeducation.com and the currency array indicator at https://quantumtrading.com
Volume Price Analysis Insights
Volume price analysis (VPA) confirms yen strength at London open. High volume on yen pair upmoves shows conviction. Quantum currency strength indicator highlights JPY as outlier—often topping rankings in risk-off phases.
Practical Trading Takeaways
Watch yen crosses like USD/JPY or GBP/JPY for clues. Strong yen buying with volume support warns of broader market weakness. Quantum matrix tools on MT5 or NinjaTrader make spotting this easy. Use it to adjust risk exposure quickly.
Anna Coulling’s approach turns sentiment shifts into opportunities. Combine VPA with Quantum indicators for clearer risk appetite reads.
The Japanese Yen: A Key Indicator of Risk-On and Risk-Off Sentiment
The Japanese yen (JPY) is unique in forex markets. It’s often called a “safe-haven” currency. This means it behaves differently from most others. JPY strength or weakness reveals global risk sentiment clearly. Traders watch it closely for clues on market mood.
Risk-Off Sentiment: Why Yen Strengthens
In risk-off environments, fear dominates. Investors seek safety. They sell risky assets like stocks or commodity currencies. They buy safe-havens. JPY tops this list due to Japan’s low interest rates and stable economy.
Examples:
- Global crises (e.g., 2008 financial crash, 2020 COVID panic)—yen surged as investors fled risk.
- Geopolitical tension or equity drops—JPY demand rises.
Volume price analysis (VPA) confirms: High volume on yen upmoves shows conviction buying. Quantum currency strength indicator ranks JPY high in risk-off.
Risk-On Sentiment: Why Yen Weakens
In risk-on periods, optimism prevails. Investors chase higher returns. They borrow low-yield yen (carry trade) to buy stocks or high-yield currencies. This pressures JPY lower.
Examples:
- Strong growth or bull markets—yen weakens as carry trades unwind reverse.
- Positive data (e.g., jobs beats)—risk appetite boosts AUD/JPY or USD/JPY rallies.
VPA spots this: Rising prices in yen crosses on high volume—yen selling conviction.
Trading the Yen with Sentiment
- Risk-Off Trades: Long yen pairs (short USD/JPY, EUR/JPY).
- Risk-On Trades: Short yen pairs (long USD/JPY).
- Confirmation: Use VPA—high volume validates sentiment. Quantum tools on MT5 or NinjaTrader rank JPY relationally for fast reads.
The yen reflects sentiment like a barometer. Strong JPY = caution. Weak JPY = confidence. Anna Coulling’s VPA approach with Quantum indicators turns this into disciplined trades.
Watch the yen for market mood. It often leads directional shifts.
What Is the Yen Carry Trade?
The yen carry trade is a popular forex strategy. It exploits interest rate differentials. Japan has historically low rates (often near zero or negative). Traders borrow yen cheaply. They invest in higher-yielding currencies or assets. The goal: Profit from the interest spread (carry) plus potential appreciation.
It’s called “carry trade” because you “carry” the position to earn interest. The yen (JPY) is the classic funding currency due to BoJ policy.
Mechanics Step-by-Step
- Borrow Yen: Take a low-interest loan in JPY (or short JPY futures).
- Convert to High-Yield Currency: Sell JPY, buy a higher-interest currency (e.g., AUD, NZD, TRY, or even USD in some periods).
- Invest the Proceeds: Place funds in high-yield assets—bonds, stocks, or just hold the currency for interest.
- Earn Carry: Daily interest differential credits your account (positive carry).
- Close the Trade: Sell the high-yield asset, buy back JPY, repay loan. Profit = carry + currency gain/loss.
Example:
- Borrow JPY at 0.1%.
- Convert to AUD at 4.5%.
- Earn ~4.4% annualized carry.
- If AUD appreciates vs JPY, extra profit.
Why Yen Is Ideal for Carry
- Low/Negative Rates: BoJ policy keeps borrowing cheap.
- Stable Currency: Low volatility historically—reduces risk.
- Global Demand: Investors worldwide borrow yen for carry.
Risks and Unwinds
Carry trades work in calm, risk-on markets. But they unwind fast in risk-off:
- Yen appreciation (safe-haven demand) forces covering—sharp JPY rallies.
- Example: 2008 crisis or 2022 yen surge—carry trades blew up.
- Volatility spikes, leverage amplifies losses.
VPA helps spot unwinds: High volume JPY buying = carry reversal.
Current Context (January 2026)
BoJ normalization (rate hikes) reduces carry appeal. But differentials remain—AUD/JPY still popular in risk-on. Watch volume on yen moves for conviction.
Carry trades reward low-volatility trends. Use VPA for timing—high volume confirms. Quantum tools (currency strength/matrix) spot relational shifts.
The yen carry trade is simple but risky. Discipline and risk management are key. Start small—test on demo!
By Anna Coulling
Creator of Volume Price Analysis