CHF-JPY in a Triangle

By: Mike Kulej

With the recent rising tensions in Korea, as well as renewed sovereign debt fears in Europe, the US Dollar became a “safe heaven” and appreciated strongly. To a smaller degree, the Swiss Franc and the Japanese Yen also regained their “safety in turmoil” status and advanced against many currencies.

This created an interesting situation in the exchange rate between the two. After moving in ever-smaller price swings for better part of the year, which created a symmetrical triangle on the daily chart, the price movement in the CHF-JPY contracted even more. During the last few weeks, this pair moved only about 160 pips and shows no direction on the main time frame. It resides right on the 100 SMA, with other technical indicators, like the MACD and the RSI at neutral readings.

Situation like this does not typically last very long and the CHF-JPY should be no exception. The price is approaching the apex of this triangle, meaning that most likely the CHF-JPY will assume a direction soon. |

The triangle itself does not provide clues about which way this pair might move, but the initial breakout often is correct. Traders with a longer time horizon might want to wait until the last high at 86.50, or the low at 80.95, is breached. This would serve as a confirmation of the new, developing trend.