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CHF/JPY Faces Selling Pressure Amid Strong Japanese Economic Data

CHF/JPY Faces Selling Pressure Amid Strong Japanese Economic Data

Market Overview – Thursday

On Thursday, the Bank of Japan (BoJ) maintained its ultra-low interest rates, citing the need for careful monitoring of global economic trends and risks related to Japan’s fragile domestic recovery. Despite this stance, the yen showed some strength following stronger-than-expected industrial production data, which provided a supportive tailwind for the currency. These positive economic indicators have encouraged a renewed wave of selling pressure on the CHF/JPY pair, as investors reassess the yen’s potential gains against the Swiss franc.

Technical Analysis

The CHF/JPY pair, in the 3-hour timeframe, has experienced an overall upward trend, although signs of a correction are currently evident. After testing a significant resistance level at 177.313 without success, the pair retreated, indicating the beginning of a corrective move toward the ascending trendline. This resistance level now stands as a key barrier, impacting the trajectory of any further bullish movement.

Currently, the price is trading near the 175.892 support level. If this level breaks, the next support zones lie at 175.506 and 175.079, which could act as targets for the ongoing correction. The ascending trendline, marked by a blue line, represents an important dynamic support level. A rebound from this line may likely resume the upward movement, attracting fresh buyers into the market.

Momentum indicators provide mixed signals at this juncture. The RSI stands at 39.82, indicating that the pair is approaching oversold territory, which could support a potential price reversal. However, the MACD remains in negative territory, reinforcing the current bearish sentiment. A shift of the MACD into positive territory would be a critical indicator of the end of the correction phase and a potential new bullish wave.

Alternative Scenario

In an alternative scenario, should the price breach the key support level at 174.389 along with the ascending trendline, the bullish outlook would be invalidated. Such a move would indicate a potential continuation of the downtrend, leading to further losses.

Key Technical Levels Overview

Resistance Levels:

  • Resistance 1: 176.196
  • Resistance 2: 176.623
  • Resistance 3: 177.313

Current Price: 175.892

Support Levels:

  • Support 1: 175.506
  • Support 2: 175.079
  • Support 3: 174.389

Key Events to Monitor

Investor focus has now shifted towards upcoming Swiss economic data, particularly inflation reports and the Manufacturing PMI, due on Friday. These releases could significantly impact the CHF/JPY pair, providing insight into economic conditions in Switzerland and further influencing market sentiment. Meanwhile, Japan’s unchanged interest rate at 0.25% and the encouraging industrial production figures continue to underpin the yen, contributing to the pair’s current dynamics.

Conclusion

The CHF/JPY pair is undergoing a correction, driven by strong Japanese industrial data and continued monetary accommodation by the BoJ. A rebound from the ascending trendline would affirm the bullish outlook, while a decisive break below 174.389 could trigger a deeper decline.

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