The Swiss franc has been slightly positive against the Yen on Thursday, as we are looking likely to continue to see a bit of bullish behavior.
CHF/JPY
The Swiss franc has been slightly positive against the Japanese yen during early trading on Thursday as we continue to hover around the crucial 198 yen level. The 198 yen level is an area that I find interesting as it had previously been supported for several months. Now, it appears that it is offering a bit of resistance as well. So, with that, we have to ask questions about market memory and whether or not this will be an explosive move.
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I would further add that both the 50-day and the 200-day EMA indicators are fairly close, and that makes it interesting from that standpoint as well. With all of this being said, I do believe this is a market that continues to find a certain amount of value hunting as we see drops.
Market Memory and Carry Trade Dynamics
This is not an interest rate play by any stretch of imagination. And in fact, this is typically a currency pair that I use for relative strength. In other words, I look to see if the carry trade is going to be active and live, then I wonder whether or not the carry trade is going to be based on the Swiss franc or the Japanese yen.
Most of the time, it could actually be both, but ultimately, I do tend to use this as a gauge to determine which currency I want to be short of. Right now, it does look like the Swiss franc is starting to strengthen against the Japanese yen again. So, this is all about shorting the yen in higher-yielding currencies. That's not to say that you can't make money here; it's just that this is an excellent indicator.
If we can break above the 50-day EMA on a sustained daily candlestick, I think at that point in time I might even go long here. If we start to break down and drop below the 200-day EMA on a daily close, then I might start to think about bailing out on my Swiss franc-denominated carry trades.
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