- The Swiss franc has rallied slightly during the trading session on Friday, as we continue to see a lot of noisy behavior against the Japanese yen.
- We had recently rallied rather significantly to break above the ¥171 level but also found that not only that level to be difficult, but also the 200 Day EMA in that general vicinity.
- The market pulled back just a bit show signs of weakness, but at this point in time we are looking at the ¥160 level as support, which makes sense considering that it had previously been resistance.
Carry Trade
Keep in mind that the carry trade is alive and well at times, and this pair is one of those that I have to pay close attention to in order to try and sort out where that’s going to be. All things being equal, this is a market that is going to be interesting to watch due to the fact that it can tell you which one of the currencies you might want to short if you are trying to match it up with a higher yielding currency.
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It is worth noting that the Swiss franc has been very weak against the Japanese yen for a while now, which makes quite a bit of sense, as the JPY has strengthened against multiple currencies, while the Swiss franc has been a little less robust. With that, I like the idea of watching this pair, and typically what I’ll do is I’ll wait to see whether or not the higher yielding currencies such as the New Zealand dollar, British pound, etc. are rallying. If they are, then I pick the weaker of these 2 currencies to trade them against. It’s a trait that is quite often, because the interest rate differential can make it pretty straightforward. Nonetheless, at this point in time it still looks like that the Japanese yen remains stubbornly strong, but it is worth noting that the ¥166 level underneath is a massive support level going back a couple of years
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