ショート

CHFJPY - SHORT; A perfect hit!

アップデート済

50 years in the making, this pair has done everything precisely by-the-numbers! - Technically speaking.
And while normally one ought to remain reluctant to trade "weak" against "weak" (in rate differential terms) ...
... but when one "weak" suddenly gains +45% versus the other on a newly found nevertheless, less than meager 1.75% rate differential ...
... It is time to pounce!
SELL - SHORT - As this pair lacks the fundamental as well as any technical reasons to deviate from it's rather predictable path - which is down from here.

p.s. This is a Quarterly chart, e.g., just how much of that likely 50,000 pips one will capture is dependent on whether this is traded with a Short Bias (with some frequency), from here on out, or simply used as a 401k plan - i.e., "just SELL it and forget it".

Here are the recent central bank rate differential changes;

Here is the CHFJPY Weekly Chart;

... with last week's healthy Reversal.

ノート

Just how absurd would be a concept of "Swiss inflation"?? (and any accompanying, continued rate hike) ... Let's review;
tradingeconomics.com/switzerland/inflation-cpi

In short, Swiss "inflation" couldn't even hold anywhere near 2%! (I live in Switzerland and as far back as I can remember, this country hasn't been this "cheap" - affordable, in relative terms - in recent memory! Pretty soon one may even find trading an all together an unnecessary burden for the lack of need for anymore money to buy stuff;-)
Switzerland, a country that is essentially energy and food independent with an enduring ultra-strong currency ... What "inflation"?? What "rate hike"?! - For what?
If anything, Japan coming out of it's 30 year slumber, currently with an ultra-weak Yen, is bound to outstrip any non-existent Swiss "inflation" multi-fold, in the foreseeable future. E.g., the current 160 Yen per CHF is without any rhyme or reason, fundamentally, technically, metaphysically or supernaturally.

トレード稼働中

Here is a good
tradingview.com/x/m96WBaqx/'
SHORT entry.

ノート

One thing, previously failed to mention but which deserves a note, effecting this - and other CHF - pairs ...

... is the SNB's massive unwind of foreign reserves, especially since last March - effectively in support of the Franc.
The problem now, it appears, that on the top of the SNB's unwind, out-bound cash outflows from Swiss deposits have hit never before seen levels and intensity, to the tune of $1/2 Trillion! - Which begs the obvious next question: Now what? ...
It is a rather unique puzzle for our Swiss banker friends which should keep them occupied for quite a while here ;-)

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Obviously the SNB decided to push against the 5 hr. Ema. They should be running out of Yen to sell, reasonably soon ;-) (They had only 9% of their foreign reserves in Yen to begin with.)

ノート

This is an excerpt from a Bloomberg news flash yesterday, regarding the action in the CHF pairs;

"The Swiss franc appreciated to 0.88 against the USD, touching its strongest level since January 2021, as investors dumped the greenback after Federal Reserve officials signaled that the central bank was nearing the end of its tightening cycle.
At the same time, concerns over a global economic recession due to sticky inflation and borrowing costs at multi-year highs boosted demand for safe haven currencies."

As an exercise in general comprehension let's examine the above, cliche-laden, cobbled together out of pure nonsense, content-free word salad.
In no particular order;

1) "... concerns over a global economic recession due to sticky inflation ..."
Abject nonsense!
Inflation is a psychologically driven phenomena, having zero (0) to do with lending rates, rather it is a pure reflection of the bank note holders' confidence in centrally created fiat money. Period. The level of inflation is entirely driven and is determined by such trust - or the lack there of - and it has zero correlation with fundamental economic activity. None, nada, nolo! (Correlation coefficient 0.18 over the past 350 years in every advanced economy.)
Furthermore, said confidence in fiat money is directly dependent on the balanced (sensible/logical) management of monetary & fiscal policy relative to GDP. No more, no less! E.g., Taking the US example (of deranged mismanagement) the Fed's balance sheet has more than doubled during the recent decade from the "eternal" 13%-16% of GDP to an unmanageable 32% of GDP, destroying all confidence in the US Dollar and thus, it's value. The End.

2) "... borrowing costs at multi-year highs boosted demand for safe haven currencies ..."
I hope that they're simply lying outright in that statement because if the author actually believed what he wrote then there really ought to be an IQ test for Bloomberg commentators as a condition of employment, with stipulations of having to score minimally higher than a baboon.
In fact, "investors" sought shit, bought no Swiss Francs, and no reported cases where someone got so overwhelmed upon learning of the stellar 1.75% SNB rates that they sunk their entire fortune into Swiss paper shortly after their successful resuscitation.
What actually happened - as it's been the case for the past 9 months - is that the SNB continues to dump the better part of their over $1 Trillion in foreign reserves, i.e., repatriating (buying up) the Swiss Franc as an "inflation control measure". (Yeah, because the Swiss can't face the current, massive 2.2% domestic inflation ;-)

Now, where the actual story gets interesting lies in the facts;
1) The SNB decided as "a policy measure" to dump the equivalent of a cool 1/2 of the country's entire GDP into buying back up the Franc. OK ... color me impressed - or is it "puzzled", the word?
2) Simultaneously, apparently unbeknownst to them (the bankers) an other, just as "cool" 1/4 of GDP, ($260 Billion) suddenly and "mysteriously" left the country in the form of withdrawn "onsight deposits" - i.e., foreign funds kept on deposit in Switzerland.
3) But wait, there is more! (Like in the infomercials) An additional and similarly cool yet, an other 1/4 of GDP was suddenly withdrawn from private/personal bank accounts.

Now let's do the math;
(1/4 + 1/4 GDP left the country) + 1/2 GDP got converted back to CHF = WTF?? ...

トレード稼働中

IFF this turns here;

... then this is a low-risk entry if not Short, yet!

トレード稼働中

SHORT

ノート

Quick overview of Japan's BoJ and Swirtzerland's SNB, as it stands;

.................................Japan...........................Switzerland

GDP (in Billions).............$4,800...............................$800
Global Lending (Credit)...$3,700 (77% of GDP)............$1,000 (125% of GDP)
Average Lending Rate;.....-0.10%...............................+1.75%
Core Inflation (YoY)...........3.3%................................1.85%
Change in forward(swap)
rates (30 days out)..........+10.9%................................-2.8%
Number of "too-big-to fail"
Banks...............................4.....................................1
Change in foreign Reserves
(including deposits)............-0.1%...............................-54%

Note;
In light of the above measures and the recent "flight of deposits" from Swiss banks (partially or mainly due to Credit Swiss's failure?) obvious reasons regarding the SNB's current policy remain few and far in between. E.g.,
1) Switzerland's financial stability (80% of GDP) is more seriously impacted (in light of recent events) than it is generally acknowledged;
2) Swiss financial authorities (most of who, nowadays, are incompetent politicians!) are well ahead of their peers, having lost faith in the Euro and the USD, envisioning a total EU collapse, much sooner than it is generally anticipated.

The last point (2) however, still could not explain the relative skew in the CHFJPY. E.g., Seriously impacted Swiss financial stability, topped with monetary mismanagement, appears to be the more sensible explanation.
In addition, Switzerland recent departure from it's historic neutrality, joining in the support for the Ukraine war, is indicative of the Swiss government yielding to US (EU by proxy) pressures, should not be overlooked or taken lightly! (I.e, the collapse of Credit Suisse was a politically motivated (US) "punishment" for Switzerland, attempting to hold on to it's neutrality, previously refusing to join the Ukraine war effort.)

トレード稼働中

SHORT

トレード稼働中

トレード終了: 利益確定目標に到達

We've got our quick +45 pips here - FLAT - and it's wait-and-see for now.

トレード稼働中

ノート

We've been Short already since 163.45;

... with the intermediate target for this move at 162.35

ノート

Chances are ...

トレード稼働中

This is quite possibly working on a reversal here;

We'll see within the next 90 or so mins. if it's a SHORT

ノート

Obviously, Short here already from the 163.40s - at least.

トレード終了: 利益確定目標に到達

Boom!!

FLAT, for now. +360 pips

トレード稼働中

Reloaded massively SHORT off of the 162.10s level.

トレード終了: 利益確定目標に到達

Covered 2/3 of Shorts for +310 pips

トレード終了: 利益確定目標に到達

Covered the remainder of those shorts for a net total haul of +701 pips, for the day (night). (This included the CHFJPY profits as a significant component (18%) of our own Yen-basket.)

トレード稼働中

SHORT for now, w. tight Stops! (Then we'll see.)

トレード稼働中

SHORT

トレード稼働中

SHORT

トレード稼働中

This is quite possibly a major top here;

(Usually those first form on the Hourly.)
SHORT

ノート

As for a comparison of this pair CHFJPY to the EUR and EURJPY prospects;

Note:
Here is a somewhat dated yet, generally still potentially informative backdrop to the SNB's policy over time:
emeritus.er.ethz.ch/content/dam/ethz/special-interest/mtec/chair-of-entrepreneurial-risks-dam/documents/News feed/Swiss_Sovereign_Fund_Sornette_4Sept2015.pdf

ノート

According to the O.E.C.'s Country Ranking (2021)
"The Economic Complexity Index (ECI) and the Product Complexity Index (PCI) are, respectively, measures of the relative knowledge intensity of an economy or a product."
oec.world/en/rankings/eci/hs6/hs07?tab=rank

1) Japan
2) Switzerland
3) Taipei
4) Germany
5) S. Korea
...
10) USA

トレード稼働中

SHORT

ノート

That "last" Stop Hunt at 164.06 was the optimum Short Entry, so far.

ノート

"Fun" facts about Switzerland - One couldn't tell from a post card

- Switzerland has the world's largest mountain of Mortgage Debt (right alongside Holland), currently standing at 106% of GDP.

In Switzerland children normally inherit their parents mortgages, as opposed to the property they live on. In this country, mortgages are pretty much issued into perpetuity and are not expected to be paid back, ever.
Consequently (one would think), Switzerland has one of the lowest home ownership in the world, with 57% of the population being renters - as opposed to Japan's 33%. But wait! - There is more ;-)
Unique to Switzerland there is a "rental tax" which is levied on your primary residence even if you own it! I.e., if you fully own your house or apartment, there is an established "rental value" attached to it, after which the owner (i..e, You) pay a "rental income tax", a if it were rented out and you've been receiving a rental income stream.

- In Switzerland, the "poverty line" currently hovers around $47,000 annually, per person.

Meaning, anything less earned and life gets even less thrilling than the otherwise everyday Swiss existence. (Let's be real! The Swiss have a clutch on "boring".)
As Orson Welles once eloquently observed about the Swiss: "500 years of democracy and what have you got?! ... The cuckoo clock." (Well, this is not entirely true as it happens, the Swiss probably having the highest technological - science and engineering - advancement in the world. See ETHz, my old alma mater ;-)

- Switzerland has the "2nd most complex trade economy" - after Japan - in the world

This is just a fact (not pro or con). Of course Japan's economy is 6-7 times the size that of Switzerland. However, both, the Swiss and the Japanese economies being heavily value-added, export economies, that does effect their currency and foreign exchange policies, a great deal! (Or, it should.) Regarding which the Swiss trade unions' currently nonchalant approach - in light of the strength of the CHF - is: "There always will be enough rich people out there who will buy Swiss luxury watches." - Good luck with that! (I beg to differ a great deal on this point!) They also currently believe that no matter how out-of-line, Swiss export pricing become, Swiss companies will always be able to find new cost-cutting measures and discover new ways of saving. Again, good luck with that, too!
Here is a simple, undeniable economic fact; When a heavily export oriented economy allows (or even, purposefully enhances) their currency's relative strength - trade-weighted or otherwise -, the the fact remains that that economy is starts importing all structural weaknesses, including inflation and unemployment, of their trading partners! (... and there is plenty of those in the EU, Switzerland's largest trading partner, with 55% of all exports.) As an added point, to fight such negative effects, "trying to find additional business savings and cost lowering measures" translates into this simple thing; You are enslaving yourself to the process - i.e., putting in your own labor - trying to compensate for other countries' weaknesses, which you've just imported. (This is as stupid and self-defeating as it sounds.)

- Switzerland is self-sufficient when it comes to food and energy

This "ought be" true. Let's reflect on the local (my) realities. In the nearby canton of Vaud, at certain electric cooperatives, electricity prices have increased +1600% YoY. (Read: 16-fold) BTW, the Swiss electric grid is not a national network as is common in most developed countries but rather a tangled web of 600+ cooperatives and generating companies. (Nothing wrong with that, just a statement of fact.) 'nuff said.

- "Switzerland is more democratic but less socialist than Scandinavia."

... however that is supposed to be understood? Let me share a different Swiss adage with probably more practical relevance; "One should make one's fortune in Switzerland and spend it somewhere else." Well, this, obviously, stands on it's own.

- The most important historical fact regarding CHF strength

In the late 1970's Switzerland pursued exactly the same monetary policy - and ended up almost with the exact same currency exchange rates - as it is currently seems to committed.
That policy ended in tears, Switzerland sinking into a far deeper depression than it's trading partners, during the stagflationary periods of the 1970s.

- ... and No, this time shouldn't be all that different.

ノート

“Switzerland is too rich and too stable to want to join the EU. Rather, we Swiss hope that the EU goes under before Switzerland does.” - Claude Longchamp

That shouldn't be a photo finish, by any measure, but as the old communist adage would have it: "We all know what will be but what will be until then?"

ノート

Should watch this here, just in case this happens ;-)

ノート

So, what will "break" the Swiss National Bank (SNB)? ...
- ... and break it bad!

Deflation. - The short answer.

This CHFJPY is a perfect example where the management of two very similar (save size) economies are monetarily influenced by radically different approaches. And thus, both approaches can Not be right, or even conducive!

Upfront, I firmly believe that the Bank of Japan has got it right!
Following this recent transatory inflationary period, we are already in mid-swing in the other direction with lasting consequences.
Here is one likely sequence of events;

- Interest rates rise
- Inflation declines and real rates rise
- Unemployment rises
- Economy slows
- Stock markets crash

(as opposed to the traditional business cycles where;
- Interest rates rise
- Stock markets crash
- Economy slows
- Unemployment rises
- Inflation declines)

The above differences are a direct consequence of a sequence of unusual "events", like the ZIRP (0%) + Covid then largest ** sudden ** global rate increases in decades, none of which were part of the "traditional business cycle". (If you believe in the A.I. hype of the 35%-50% productivity increases due to AI than tack on the largest deflationary pressures in history, ever imagined - or not even.)

The bottom line, relating to the SNB, is this;
Since the SNB spent the last decade-plus in a severe lack-of-inflationary environment, fighting tooth-and-nail trying to keep down the Swiss Franc, so Switzerland's position wouldn't become all but untenable as a net exporter ...
... just what is likely to happen now, on the heels of their deranged "inflation control policy", buying up all the Swiss Franc from New York to Tokyo. as Deflation descends on the globe, once again, but this time in earnest and deeply structurally embedded?
They just better hope that there will be enough "planetary demand" left for their currency, for the amount they will have to dump (sell) in short order just to keep afloat the Swiss economy! (... and No, there will be disappointingly little demand, I suspect.)
As an added bonus, the exact same SNB policy during the tail-end of the 1970s resulted in one of the worst country depressions anywhere by the early 1980s. - And for very similar (or the exact same?) reasons.

ノート

USDCHF

トレード稼働中

SHORT
Looks like it's starting to roll over, here.

ノート

Watch out for this, though.

トレード稼働中

If not Short, yet, now is a good time!

トレード稼働中

The current optimal Short Entry - if not Short, yet.

トレード終了: 利益確定目標に到達

Short term target coming up, here!

FLAT, for now +110 pips

トレード終了: 利益確定目標に到達

Perfect hit and turn LONG in that PRZ

FLAT, for +70 pip Start looking for a Short Entry!

トレード稼働中

So far, this pair has been going pretty much by-the-numbers.

Once again, entering a Major SELL Zone (50 pips wide).
Time to start looking at the lower time frames (30 min.-1 hr.) for a reversal, for a Short Entry.

トレード稼働中