Over the last several weeks, we have been watching the CHF/JPY pair as we continue to bounce around in a symmetrical triangle. This is going to be a very interesting pair to watch as both are considered to be “safety currencies”, and as a result you can watch this pair to decide which currency you should either buy or sell based upon risk appetite in other currency markets.
When traders are a bit concerned about global growth or geopolitical issues, they will typically buy the Swiss franc or the Japanese yen. However, if you do something called “triangulation”, meaning looking at least three currencies, you can maximize returns. When looking at the CHF/JPY pair, you are looking to see which safety currency is stronger than the other. Because we are forming a symmetrical triangle, and I would point out on top of support, it suggests that perhaps the Swiss franc will strengthen against the Japanese yen, although we do not have confirmation of that yet.
If that does in fact happen, then we know that if we place a “risk off” trade, you will want to short the GBP/CHF, because the Swiss franc is stronger than the Japanese yen. By contrast, if we see a scenario where it is a “risk on” trade, you would be better off buying the GBP/JPY pair, because the Japanese yen is weakening.
As for this pair by itself, if we can break above the ¥112 level, we are very likely to go looking towards ¥114 above. By contrast, if we break down below the ¥110.50 level, we will test the ¥110 level, and then possibly the ¥109 level after that. That being said, the pair seems to have less resistance than support in the vicinity, so that should always be paid attention to.