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CHFJPY Analysis (Jan, 2022) Bullish Trend Continues

According to the OECD the Swiss economy has successfully recovered to pre-crisis levels.

The Swiss National Bank has intervened regularly in the foreign exchange market to stave off safe-haven pressures on the franc and resulting deflationary pressures, the report said. - Bloomberg

However with all good news there are some risks to Switzerland’s economic recovery, this includes the spread of Covid-19 variants due to the Switzerland not having great engagement in vaccination. In comparison to neighbouring countries Switzerland has one of the lowest vaccination rates which may slow down growth.

Technology Summary

Overall the economic news has been fairly bullish in regards to Switzerland's economic recovery from the pandemic. Looking further into the reports we can see overall the CHF potentially looking for trend continuation.

The following indicators are all showing bullish signs:

  1. Macro currency strength meter

  2. GDP Differentials

  3. Hedge Fund Positions (COT Report)

One of the economic indicators the interest rate differentials are actually showing bearish signs as both countries currently hold negative rates.

Macro Currency Strength Meter

The macro currency strength meter shows two main important trends. Firstly, CHF has been trending upwards since December suggesting a bullish CHF. JPY has fundamentally been trending downwards suggesting a bearish JPY.

If these trends continue we may be in for another bullish push in an already trending movement on CHFJPY.

Overall, it shows that fundamentally CHFJPY is in a bullish movement and it's something we should have our eyes on.

GDP Differentials

The GDP Differentials were also starting to take converge, suggesting that Switzerland may be in for a bounce back agreeing with the overall bullish trend.

If forecasts continue heading towards the upside there may be an even longer upwards trend than anticipated.

Trade Analysis (Imports & Exports)

One of the commodities we've selected to analyse against CHFJPY is Gold. Gold is a commodity classed as a safe haven asset, similar to JPY. There was a time where CHF was pegged against the gold with many of their reserves.

What we've found out is that CHFJPY is slightly negatively correlated against Gold prices suggesting as Gold prices fall CHFJPY rise.

Most recently, we're seeing gold prices slowly climbing which suggests a slight downside movement may be due on CHFJPY. Gold prices are therefore currently going against the fundamental bullish bias.

ROG is a Swiss pharmaceutical company focused on various medical treatments, with the ongoing pandemic there's no surprise there's been some bullish movement on ROG which has a super high positive correlation against CHFJPY.

The recent spike in ROG prices along with the positive correlation suggests we're in for a bullish move on CHFJPY, overall agreeing with the fundamentals from the currency strength meter.

Interest Rate Differentials

The interest rate differentials is an interesting indicator as this is one of the bearish signals on the fundamental side whereas the rest of the indicators are bullish.

Switzerland have maintained negative rates for a long period of time.

Hedge Fund Positions

Using the COTA analysist tool at Logikfx we're able to gauge the hedge fund sentiment on CHF and JPY. In this case the open interest for both currencies is negative meaning that hedge funds are selling both CHF and JPY.

However, as we can see the differential line is positive meaning hedge funds are in more sell positions than buy positions.

You could see this as slightly agreeing with the fundamental bias of bulls coming into the markets.

Price Trends

The price trends for CHFJPY have shown bullish trends since 2020 and overall CHF has appreciated significantly over this period.

What we're seeing now is a potential correction and continuation on CHFJPY.

Price may see a correction towards the red line which saw price bounce back higher creating a level of support.


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