- Several key bearish technical elements have emerged on the CHF/JPY.
- The Tokyo-area inflationary data for October has surpassed expectations that revive a potential hawkish guidance from the Bank of Japan (BoJ)’s upcoming monetary policy decision next Tuesday, 31 October.
- Watch the short-term key resistance of 167.60 on CHF/JPY.
The price actions of CHF/JPY have staged the expected rally and hit the resistance levels of 166.60 and 167.90/168.30 as highlighted in our report. The cross pair printed an intraday high of 168.42 on 20 October 2023.
Through the lens of technical analysis, the price actions of highly liquid FX pairs such as CHF/JPY do not move in a vertical fashion, but rather oscillate or mean revert within a trending phase.
In the past week, there has been an emergence of key technical elements that advocate for a potential multi-day corrective decline for CHF/JPY within a major uptrend phase that is still in place since its 13 January 2023 low of 137.44.
Fundamentally, the ongoing down move seen in the CHF/JPY as it shed 58 pips intraday at this time of the writing has been the revival of inflationary pressures in the leading Tokyo area CPI data for October. Tokyo’s core-core inflation rate (excluding fresh food and energy) rose to 2.7% y/y and surpassed its August year-to-date peak of 2.6% y/y to hit a 31-year high.
This elevated set of inflationary numbers from Japan ahead of the Bank of Japan (BoJ) monetary policy decision and the release of its latest forecast of Japan’s key economic data (outlook report) on next Tuesday, 31 October has increased the odds of a hawkish guidance which in turn trigger a stronger JPY movement today.
Daily bearish reversal candlestick sighted
Fig 1: CHF/JPY major & medium-term trends as of 27 Oct 2023 (Source: TradingView, click to enlarge chart)
The CHF/JPY has formed a daily “Shooting Star” bearish reversal candlestick on 20 October 2023 before this current slide of -185 pips took form at this time of the writing. In conjunction, the daily RSI momentum indicator has exited from its overbought region (more than 70 level) thereafter and still has potential room to manoeuvre towards its oversold region.
These observations suggest that medium-term downside momentum is likely to have emerged which in turn increases the odds of a multi-day corrective decline in CHF/JPY.
Minor bearish breakdown from ascending channel
Fig 2: CHF/JPY minor short-term trend as of 27 Oct 2023 (Source: TradingView, click to enlarge chart)
In addition, as seen from the shorter time frame chart (1 hour), the price actions of CHF/JPY have broken down below the minor ascending channel support yesterday, 23 October.
Watch the 167.60 key short-term pivotal resistance for a further potential slide towards the next immediate support zone at 165.20/164.80 (also the 20 and 50-day moving averages). A break below 164.80 exposes the next support at 164.00/163.70 (the median line of the major ascending channel in place since 13 January 2023 low and congestion area from 24 July/October 2023).
On the flip side, a clearance above 167.60 invalidates the bearish tone to see a retest on the medium-term resistance level of 167.90/168.30.
