Japanese Yen (JPY) & Swiss Franc (CHF) Analysis and News
- Japanese Yen Plummets Across the Board
- EUR/USD & US Yields Signal Lower CHF,
- US CPI a Key FactorFor Near-Term FX Outlook
Japanese Yen Plummets Across the Board
Commodities soaring, global bond yields edging higher has seen the Japanese Yen tumble across the board with USD/JPY trading on a 113.00 handle and now at its highest level since late 2018. As I have said previously, the Japanese Yen has largely been a fixed income play and thus it is important to keep a close eye on the US 10yr yield for direction. A reminder that tomorrow will see the latest US CPI report and in light of the increased focus on the stagflation narrative, market sensitivity to the data will be heightened and by extension the Japanese Yen. That being said, with US yields seeing a slightly subdued open from Friday’s close, chasing USD/JPY higher from current levels is a risk and instead, focus will be on dip demand with particular interest from the 2019 and 2020 peaks at 112.40 and 112.20 respectively.
USD/JPY vs US 10Yr Yield
Source: Refinitiv
| Change in | Longs | Shorts | OI |
| Daily | -3% | 1% | 1% |
| Weekly | 7% | 5% | 6% |
IG Client Sentiment Suggests USD/JPY Bull Momentum Will Continue
Data shows 28.38% of traders are net-long with the ratio of traders short to long at 2.52 to 1. The number of traders net-long is 7.30% higher than yesterday and 10.19% lower from last week, while the number of traders net-short is 12.47% higher than yesterday and 23.61% higher from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests USD/JPY prices may continue to rise.
Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger USD/JPY-bullish contrarian trading bias.
EUR/USD & US Yields Signal Lower CHF
Yesterday, I touched on the Swiss Franc’s recent resilience, despite being faced with higher commodities and firmer bond yields. Taking a look at the charts below (Figure 1. & Figure 2.) the Swiss Franc is trading at relatively elevated levels vs EUR/USD and US Yields and thus I remain biased to fade CHF upside, looking for a break of 0.9300. Of course, tomorrow’s CPI will be a key determinant in that effort for a topside breach.
EUR/USD vs USD/CHF (Inv)
Source: Refinitiv
US 10yr Yield vs USD/CHF (Inv)
Source: Refinitiv
IG Client Sentiment Signals Potential USD/CHF Reversal Higher
Data shows 69.48% of traders are net-long with the ratio of traders long to short at 2.28 to 1. The number of traders net-long is 2.26% higher than yesterday and 1.87% higher from last week, while the number of traders net-short is 11.16% higher than yesterday and 9.13% higher from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests USD/CHF prices may continue to fall.
Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current USD/CHF price trend may soon reverse higher despite the fact traders remain net-long.
