Chart of the Day: CHFJPY

Potential correction CHFJPY

The SNB remains uncomfortable with CHF appreciation and continues to remind the market it will need to be careful about any attempts at trying to force an appreciation in the currency. But the SNB will also need to be careful right now, as its strategy to weaken the Franc is facing headwinds from a less certain global outlook, and from a US administration that has put Switzerland on its currency manipulator watchlist. Any signs of risk liquidation in 2020, will likely invite a very large wave of demand for the Franc that will put the SNB in the more challenging position of needing to back up its talk with action, that ultimately, may not prove to be as effective as it once was, given where we’re at in the monetary policy cycle.

The record run in US equities has been behind a lot of this latest pressure in JPY. Market participants have been feeling good about the US-China phase one trade deal, news that phase two discussions are underway and this latest round of robust data out of China. At the same time, Thursday’s healthy US economic data, highlighted by retail sales and the Philly Fed, are also helping to drive risk appetite and hence a persistent offer in JPY trade. Another development factoring into the JPY offer is the US Treasury’s that it plans to issue the first ever 20 year bonds. Looking ahead, we get US data in the form of housing starts, building permits, industrial production, JOLTs job openings and Michigan confidence today.

From a technical and trading perspective, the CHFJPY has all but satisfied the upside objectives from my previous Chart of the Day analysis. The market is now approaching a Potential Price Reversal Zone (PPRZ). While near term corrections are capped above 113.50 prices should advance for another leg of upside to test the PPRZ sited at 114.50/75. Anticipate offers to emerge on this primary test. INtraday reversal patterns that close below the near term volume weighted average price should encourage further profit taking targeting a test of symmetry swing support back towards 113.

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