- The Swiss franc is pulled back just a bit during the trading session on Friday against the Japanese yen, near the ¥175 level.
- Perhaps it is a bit of psychology due to the fact that it is a large, round, psychologically significant figure, or perhaps it’s also the fact that we had tested the recent swing high.
- Ultimately, we can break above the ¥175.50 level, then it makes a certain amount of sense that we could send this market much higher.
Short-term pullbacks at this point in time should continue to be buying opportunities as this is a market that will continue to favor the slightly higher interest rates of Switzerland over the ridiculous rates in Japan. The Bank of Japan is nowhere near raising rates, but it’s also worth noting that the Swiss National Bank is likely to continue its loose monetary policy and perhaps even cut further. Because of this, we may see the momentum drift a little bit to the downside in this pair, but overall I still expect to see this pair be bullish, as the Japanese yen has essentially been the punching bag of other forex participants.
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Carry Trades
This is a great chart to sort out carry trades, due to the fact that it can give you an idea as to whether or not you are going to get “more bang for your buck” shorting the yen or shorting the Swiss franc. As the Swiss franc is rising against the Japanese yen at the moment, it does make a certain amount of sense that you start to look for opportunities to buy currencies against the yen, because it is the weaker of these 2 currencies.
In general, I think as long as we can say above the 50-Day EMA and the ¥171.50 level, it makes quite a bit of sense that we will have to continue to look for buyers. Even if we break down below there, it doesn’t necessarily mean that I am looking to short this market, just that I think you could see a lot of confusion and therefore I might be on the sidelines.
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