CHF/JPY isn’t a pair that a lot of people talk about, but I think that it is because they don’t understand that although both are “safe haven” currencies, they don’t’ have to move in tandem. For example, there can be a reason why money is leaving Switzerland and not Japan. Perhaps it is because the Swiss National Bank is working so hard to keep money from flowing into Switzerland by doing such things as paying negative interest rates. This should drive money from the Swiss economy into other “safe haven” economies when times are tough, and traders are looking to park money in a safe place.
By looking at this pair, you can see where money is “running towards” in a bad market. Currently, some things are a bit different as the Swiss are flat out trying to peg their currency against the Euro, thereby selling off the Franc on the whole. While central bank intervention typically won’t work over time, the Swiss have the luxury of being in a thin enough market to actually out print it.
Flag?
The current action in this pair looks as if we are trying to form a bearish flag. This pattern would be interesting because of the implied move. This pair looks as if we could be seeing a move down to the 74 handle, based upon the pole of the flag pattern. Needless to say, this gives us plenty of room to go to the downside.
The Swiss are more than happy to see this pair fall, and as such won’t be doing much to reverse course. The Japanese more than likely won’t care about this pair overall and as such won’t intervene in it. However, if the EUR/CHF pair starts to fall rapidly, we think the Swiss National Bank will intervene, and this could send this pair lower in a rapid manner.
Also, the USD/JPY pair could trigger Bank of Japan intervention, and this would weaken the Yen overall. Needless to say, this pair will be interesting over the next few months. I currently see a move below the Friday lows as my sell signal and a sign that we are going to the 74 level.