The CHF has been very strong vs. most currencies for a few years now. The weekly EUR/.CHF chart below shows the fall in the cross rate since peaking near CHF 1.20 in 2018 after the bounce from the 2015 SNB debacle low. Has the CHF bull trend ended? Early days, but the dip below the CHF 0.9400 area low from 2022 over the last few weeks seems to have drawn out CHF sellers rather than buyers. The lack of follow through on a clear break lower comes as the Swiss National Bank seems to be calling time on rate hikes, and perhaps more importantly, is suggesting that a strong CHF won’t help them meet their inflation goals. This could see the CHF weaken back to the CHF 0.9680 area, and even back to parity, where it traded at the start of 2023.
If the CHF does consolidate vs. the EUR this year, then the supercharged gains vs. the JPY (weekly chart below) could be set to reverse course.
Our view on USD/JPY is for a pullback to the Y125 and lower levels. The Bank of Japan may move in April to reduce/remove stimulus. For the cross rate, the current flirting with Y170 could set up Y180 and even Y200 if the trend extends. If the CHF does weaken this year, and if the JPY strengthens, then a reversal may be seen instead. The slightly rising red line near Y162 serves as big chart support to watch ahead of the 50-week moving average near Y159.50. The long term rising line (yellow) near Y153 offers support ahead of the 2022 peak near Y151.30. Fibonacci ratio retracement targets off the 2016/2024 rally point to a 38.2% target near Y145, with a 50% retracement target near Y137. The latter is, by a startling coincidence, our 12 month target, calculated off of our USD/JPY, EUR/USD, EUR/JPY and EUR/CHF forecasts. Funny old world…
Risk? Trends can extend, keep an eye on the recent highs as risk, and failure to break below the red line would disappoint CHF/JPY bears, if seen.
Gerry Celaya
Chief Strategist