After the USD/CHF and USD/JPY major currency pairs showed a multidirectional performance last week, the CHF/JPY cross-rate skyrocketed. The pair has breached the all-time high seen during an extremely bullish rally of the Swiss Franc in 2015 when many financial services companies failed to cope with such a sudden strengthening of the currency across the board. CHF/JPY strengthened by more than 8% to the exchange rate in 5 weeks, and the uptrend seems unstoppable so far.
The technical outlook is extremely bullish on the weekly timeframe. Since the breakout happened, it’s fair to expect an acceleration and the technical indicators are in favor of such a scenario. It’s understood that the primary driver is the fundamental divergence between Swiss and Japanese monetary policy, however, technicals play a significant role in the background of this uptrend.
The chart setup above shows that the rate has been above the Ichimoku Base line since October 2021, while the leading span has been increasing positive surplus. DUring the recent bearish rebound that helped the pair to reload overbought conditions, the Base line was exactly the support curve that stopped the bears and reversed the trend back up. The ADX and DI indicator has the mainline at extremely high values compared to previous peaks, which is a sign of strong momentum and higher volatility. The gree line is well above the red one, and the surplus between them is increasing, which shows the absence of sellers at this stage. The Relative Strength Index is overbought, however, that might not stop the bulls as a very important resistance has been breached.
Another weekly chart setup below confirms previous suggestions. The rate is constantly testing the upper line of the Bollinger Bands indicator, while upside whipsaws are absent. Both borders of the Bollinger Bands are spreaded and headed North. The sequence of higher highs is in favor of a bullish continuation scenario.
The Awesome Oscillator reflects the strong momentum, while the previous peak isn’t breached yet. Standard deviation is extremely far from the neutral zone, which points to a high distance between the current rate and average values, and also reflects the high volatility. Best wishes traders!!