CHF/JPY Tension Rises: Preparing for a Potential Downward Shift

By Tomasz Wisniewski|

Published: March 05 2024, 07:12 GMT+0

CHF/JPY Tension Rises: Preparing for a Potential Downward Shift


In today’s analysis, we’re diving into the intriguing dynamics between two traditionally safe-haven currencies, the Swiss Franc and the Japanese Yen. This pairing, often considered exotic by traders, has been showcasing some fascinating movements that warrant a closer look, particularly given the recent developments that could hint at a significant shift in the market.

Since mid-January, CHF/JPY has been caught in a sideways shuffle, defined by a rectangle pattern that’s been keeping the price action restrained. The upper boundary of this pattern is marked by a resistance at 171.5 (yellow line), while the support at the lower boundary is defined by a blue line at 169.6. What’s particularly interesting in recent trading sessions is the pressure at the lower boundary. Unlike the typical bounce we might expect from the support, there’s an absence of such rebound, suggesting that sellers are gradually gaining the upper hand.

The question then becomes: how should traders navigate this scenario? Within the confines of the rectangle, traditional wisdom might suggest buying at the bounce off support and considering sales at resistance. However, the real intrigue lies in the potential for a breakout. Given the increasing selling pressure, a break below the 169.6 support could unleash a mid-term sell signal that many might find compelling. Conversely, should the price surge past the 171.5 resistance, we’d be looking at a buy signal.

From my perspective, the scales seem tipped towards a downward breakout. The buildup of selling pressure, coupled with the current market dynamics, makes a case for a bearish move more convincing. Traders should keep a keen eye on this development, as the breakout, should it occur this week, could present a notable opportunity.