CHFJPY in important resistance area; yen to strengthen?CHFJPY in important resistance area on daily chart; yen to strengthen?
The Swiss franc and Japanese yen currency pair (CHFJPY) has maintained a steady uptrend on the daily chart since 2020, consistently trading above the 200-period Moving Average. However, in September, CHFJPY dipped below the SMA200 for the first time, signaling a potential increase in selling pressure and indicating a stronger appreciation of the yen against the franc.
This yen appreciation aligns with Japan’s recent shift in monetary policy – the Bank of Japan had kept interest rates in negative territory since 2016. On July 31, Japan raised its key interest rate for the second time in 2024, bringing it to 0.25%.
Meanwhile, the Swiss National Bank (SNB) has consecutively lowered interest rates during its last three meetings.
Technical indicators point to potential downward pressure on CHFJPY
From a technical perspective, after breaking below the SMA200 on the daily chart, CHFJPY retested it from below, suggesting that the SMA200 may now act as a level of resistance.
The price also reached the 50% retracement level of the bearish Fibonacci on the daily chart, which could serve as potential resistance. A double top pattern is also forming in the same Fibonacci region.
From a technical standpoint, a confluence of factors can be seen:
1. The SMA200 was broken, previously acting as support, and could now serve as resistance.
2. A retracement to the 50% level of the bearish Fibonacci, which could also act as resistance.
3. A double top forming on the daily chart.
From a macroeconomic perspective, the following is affecting CHFJPY:
1. A shift in Japan’s monetary policy with two interest rate hikes this year.
2. Monetary easing in Switzerland – the SNB has cut the policy rate three times in 2024. It currently stands at 1% – the lowest level since early 2023.
These factors create a context where a potential short opportunity could become more apparent if the price breaks below 171.30. If that occurs, CHFJPY could decline to the 167.10 level within a few days, where it may encounter some support.
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