CHF/JPY Forecast - 17 August 2016

The CHF/JPY pair isn’t one that a lot of you trade on a frequent basis I assume, but it is a very important Forex pair to pay attention to. This is because both currencies are considered to be safety currencies. In other words, in times of concerned people are generally buying one or the other, or both currencies. The Swiss franc of course is considered to be safety for Europeans, while the Japanese yen tends to be more safety oriented for Asians. Obviously, traders will by both of these currencies around the world, but on a local standpoint those 2 statements tend to be correct.

Because of this, you can look at this pair as to which area is having more trouble. With this in mind you can clearly see that the Swiss franc has been losing value against the Japanese yen for quite some time. What this means is that there are concerns about Switzerland in relation to Japan. In my estimation this has to do with the European Union, and not Switzerland itself. The biggest problem Switzerland has is that the Europeans purchase 85% of their exports and that of course is going to hurt the economy.

Possible Bounce

I believe that this market is setting up for possible bounce though, and as you can see I have a longer-term trend line clearly marked on this chart. I also have the 100-day exponential moving average, which has been rather reliable as far as dynamic resistance is concerned. The fact that we ended up forming a hammer during the day on Tuesday suggests that there are buyers just below, and this might be a bit of a “knock on effect” of the USD/JPY pair testing the 100 handle. With this being the case, expect the Japanese yen to sell off over the next several sessions. With that being my base case, I believe a break above the top of the hammer for the day on Tuesday might provide a short-term buying opportunity for those of you who tend to swing trade for just a few sessions. On the other hand, if we break down below the hammer the market will more than likely reach towards the 102 level.

CHFJPY

Christopher Lewis

Christopher Lewis has been trading Forex for several years. He writes about Forex for many online publications, including his own site, aptly named The Trader Guy.