CHF/JPY has been on a relentless uptrend this year, but momentum could be shifting.
On the weekly chart, we’re now seeing a classic bearish divergence, where price prints higher highs but the stochastic oscillator forms a lower high.
That alone isn’t enough to make a confident trading decision, but the macro could back this up.
SNB Is Dovish
The Swiss National Bank (SNB) has been more dovish than most central banks, cutting interest rates to zero. Rates could turn negative again. If that happens the CHF becomes a negative carry trade once more.
And let’s be honest, the CHF is overvalued, especially against currencies like JPY that are now benefiting from safe haven flows.
Switzerland Agrees Not to Manipulate Its Currency
This has been a common theme since President Trump took over office again in the U.S. The SNB has often been accused of intervening to weaken CHF when it got too strong.
Now in a report today, they’re publicly aligning with the U.S. to avoid manipulation.
JPY Strength Is Quietly Building
Meanwhile, the Japanese yen has been staging a comeback.
Lower U.S. yields, global risk-off sentiment, and positioning unwinds are all favoring JPY strength.
CHF/JPY has been propped up by JPY weakness for a long time. But if that dynamic flips? This could unravel fast.
The Trade Idea: CHF/JPY Reversal
Chart: Weekly bearish divergence forming
Macro: CHF overvalued, SNB could head into negative rates.
JPY tailwinds: Risk-off flows, yield differentials, BoJ speculation.
Narrative: The CHF has fewer defenders now, and the JPY is gaining some ground.
Watch for a break below key support levels. A confirmation of divergence with momentum breakdown could trigger a medium-term move lower.