- The CHF/JPY has broken to a fresh, new high against the Japanese yen during the trading session on Wednesday, as we continue to see the Bank of Japan do everything, it can to keep interest rates down.
- After all, during the overnight Asian session, the Bank of Japan stepped into the bond market and purchased them directly, keeping interest rates down in the land of the rising sun.
- This is toxic for a currency, and it will continue to be so for the Japanese yen.
The Swiss are slightly tighter, and by Swiss standards, are extraordinarily tight. That being said, I think this is a trend that continues, as the Japanese yen continues to suffer against almost all currencies. This is essentially a battle to see which one of the currencies will become a “funding currency” for carry trades. It’s obvious that the Japanese yen is weaker, so it will be the JPY. The Swiss franc has further to go at this point and has recently had a nice little pullback that we have bounced from quite drastically.
It Makes Sense That We Go Higher
Underneath, we have the 50-Day EMA coming into the picture, offering a bit of support near the ¥164 level. It is rising, so it should continue to offer support as well. I think this is a situation where it’s going to be almost impossible to short this market, and it has been one of my favorite “Longs” for some time. I think that eventually, we go to the ¥170 level, but it may take some time to get there. I’m not necessarily a big fan of the Swiss franc per se, just that I recognize that the Japanese Yen has so many issues attached to it.
At this juncture, it makes quite a bit of sense that we continue to see plenty of buyers willing to jump in and take advantage of the longer-term trend. The Swiss franc is also considered to be a safe currency, so there is a little bit of interest in it at this point in time due to the massive amount of geopolitical uncertainty. I do anticipate that it’s probably only a matter of time before we see its attractiveness continue, therefore it makes sense that we go higher.
Potential signal: I am a buyer of this pair. I have a stop loss at the ¥165 level, with a target of ¥168.
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