Short CHF/JPY presents a high-conviction short-term trade opportunity driven by growing divergence in monetary policy trajectory, weakening Swiss inflation dynamics, and a technical structure that suggests a correction within an overall bullish trend. While the longer-term trend remains upward, the current setup favours a tactical bearish stance as the pair shows signs of exhaustion and correction pressure.

Fundamental Analysis

Switzerland’s macroeconomic landscape has shifted notably dovish. April inflation came in at 0.0% YoY, well below the midpoint of the Swiss National Bank’s (SNB) 0–2% inflation target band. This marks the lowest reading in four years and reinforces expectations that the SNB will not only continue cutting rates but may also intervene in currency markets to dampen franc strength.

The SNB’s current policy rate stands at 0.25%, already one of the lowest globally, and officials have recently hinted that negative interest rates remain on the table if inflation continues to undershoot. The appreciating franc is hurting export competitiveness and driving down imported inflation, prompting increasing pressure on policymakers to act.

In contrast, the Bank of Japan (BoJ) is in no hurry to normalise policy. Despite ending negative rates earlier this year, the BoJ has maintained an ultra-loose stance with the benchmark rate at 0.5%. Moreover, growth and inflation expectations have recently been revised downward, which reinforces the view that Japan’s monetary tightening cycle will be slow and cautious.

While both currencies are considered safe havens, the SNB’s policy pivot is more aggressive, tilting the balance in favour of the yen in the short term. Japan’s current account surplus and improving labour market metrics also provide tailwinds, further validating a bearish bias on CHF/JPY.

Sentiment Analysis

Retail sentiment across platforms such as Myfxbook and ForexClientSentiment shows that a majority of traders (around 65–77%) are short CHF/JPY, suggesting a strong contrarian bullish bias from a sentiment perspective. This typically would favour continued upside. However, in this case, macro fundamentals and technical signals are misaligned with this sentiment, and recent shifts in Swiss policy expectations appear to be outweighing crowd positioning.

Institutionally, sentiment has started to cool on the franc. With Swiss policymakers expressing open concern about low inflation and overvaluation of the currency, many institutions are scaling back long-CHF exposure. Conversely, while the BoJ is still dovish, the yen has already priced in most of that, and appears undervalued relative to fundamentals in the short term.

This creates a short-term imbalance where speculative CHF longs could unwind rapidly if the SNB takes action.

Technical Analysis

The daily chart for CHF/JPY shows that the pair is now in a corrective phase following a sustained rally. Price is currently at 173.49, trading just above the Kumo (cloud), but has sharply pulled back from recent highs near 175.50.

The Conversion Line (174.10) has just been broken to the downside, and price is testing the Base Line at 172.29, which is the next key support. The Leading Span A (173.20) is above Span B (171.16), indicating a bullish future Kumo, but the current action suggests short-term exhaustion.

The Chikou Span remains above price but is flattening, hinting at weakening trend strength.

The MACD has just crossed below the signal line, and the histogram has turned negative — a clear bearish momentum signal. Meanwhile, RSI has dipped to 52.97, down from overbought levels in April, and is pointing lower.

Volume has spiked on the latest red candle, signalling increased selling interest.

Candlestick analysis confirms the shift: recent candles show rejection from highs, followed by a strong bearish engulfing pattern, reinforcing a short-term reversal setup.

Conclusion

While CHF/JPY remains in a longer-term bullish trend, all signals point to a short-term corrective phase. The divergence between the SNB’s dovish tilt and the BoJ’s more passive stance supports near-term yen strength. Retail sentiment is overwhelmingly short, but institutional and technical factors suggest the pair may correct further toward support at 172.30 and possibly lower.

Outlook: Bearish CHF/JPY (Short-term correction)
Key Resistance: 174.10
Key Support: 172.30, followed by 171.15
Bias Shift Level: A daily close above 175.00 with strong volume would invalidate the short setup

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