CHF/JPY Downside Targets as Swiss Franc Loses Appeal

Market Overview

On Monday, the CHF/JPY pair experienced bearish momentum as the Japanese yen gained strength due to rising global economic uncertainty and fears of slower global growth. Meanwhile, the Swiss franc, traditionally viewed as a safe-haven currency, has lost some of its appeal following the Swiss National Bank’s (SNB) decision to lower its key interest rate to 1%. Despite its safe-haven status, the franc struggled against the yen, placing CHF/JPY in a downward trajectory. The broader sentiment in the markets points to heightened demand for the yen amid these risk-averse conditions.

Technical Analysis

On the four-hour chart, CHF/JPY has reached a critical support level at its 100-period moving average, with sellers looking to break through the current floor at 168.676. If they succeed, this could open the door to further declines, with immediate downside targets at 168.170, 167.921, and 167.454. Should bearish momentum continue, traders will likely aim for the 166.948 to 166.699 support zone.

The MACD and RSI confirm the prevailing bearish outlook, signaling increasing selling pressure as the pair heads lower. Sellers will aim to maintain control unless buyers can defend key support levels and stage a recovery.

Alternative Scenario

If buyers manage to regain control, breaking above the key resistance at 169.898 would signal the end of the current downtrend. This level, which aligns with the 34-period moving average, could act as a critical hurdle for bulls. A sustained move above this resistance would likely invalidate the current bearish scenario and pave the way for a potential reversal.

Key Levels Overview

• Resistance Levels:
  • Resistance 1: 169.898
• Current Price: 168.670
• Support Levels:
  • Support 1: 168.170
  • Support 2: 167.921
  • Support 3: 167.454
  • Support 4: 166.948
  • Support 5: 166.699

Key Events to Watch

Several significant economic events could affect both the Swiss franc (CHF) and Japanese yen (JPY) in the coming days:

For the Swiss franc, the KOF Leading Indicator due on October 2, 2024, will provide insight into the Swiss economy’s direction for the next six months. This is critical in shaping market expectations for the franc. Following this, the Swiss CPI (Consumer Price Index) on October 4, 2024, will offer a clearer picture of inflationary pressures, which could impact SNB’s monetary policy decisions and the franc’s strength.

For the Japanese yen, the BoJ’s monetary policy meeting minutes scheduled for October 3, 2024, will provide valuable insights into the Bank of Japan’s stance on interest rates and its broader policy outlook. This will set the tone for yen trading as market participants anticipate potential changes. The BoJ’s interest rate decision, expected on October 6, 2024, could further influence the yen, particularly if there are any unexpected shifts in the central bank’s approach.

These events will likely stir volatility in the CHF/JPY pair, making it crucial for traders to stay alert to potential price swings and the broader macroeconomic landscape.

Conclusion

CHF/JPY remains under selling pressure as the yen benefits from rising risk aversion while the franc weakens due to lower interest rates. The technical outlook suggests further downside if sellers can break through key support levels. However, upcoming economic events for both Switzerland and Japan will be critical in shaping the pair’s next move, with traders closely monitoring inflation data and central bank actions for further direction.

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