Tuesday, 9 August 2011

CHF/YEN - What a big W

If you are trading FX, you may notice that the focus for these few weeks have been on EURO. In the recent article that we wrote, we pointed out the weakness on EUR/CHF and noted the trend may continue to go downwards. However, another pair which has been borrowing the weakness is the CHF/YEN. This pair had rally up to record high of 108.689 before retreating back to 106.700 as players took profit out since its impressive run up from 17th June.

                               *Chart ploted using MetaTrader 4

Although the Swiss National Bank did intervene, but their intervention with interest rate near zero rate proved to be rather weak in response to huge inflow of purchasing power. Browsing through the chart from 2007 onwards, you may see that this pair crashed down to 74.682 on 11th December 2008. Since then, it had tried to make higher highs. No doubt this time round, CHF has been sort out to be rather safe in a time where there were so much of uncertainty. If you notice from the chart below, this pair had craved out a big W since then and broke out of its last resistance @ 105.041.

                               *Chart ploted using MetaTrader 4

What we are trying to explain is that the rally in this pair is quite impressive recently, and the fact is that both currencies are safe haven category. Since that is the case, CHF is the only winner and the currency that players are more interested in. But on the other hand, it will be prudent if players who wanted to chase the price at this point to think twice on the underlying reasoning for its rapid rise, and to look over at different indicators, as well as follow through action before making any decision to buy up this pair. We view the rally as impulsive rally with technical stating very clearly that once the momentum reverse, it will be a symmetry drop in price as compare to the sharp rally. Of course, for this pair to crash down will be quite impossible at a time like this, but if big players decided that this is oversold, they may switch over to YEN as it is still not at record low against EUR.

Anyway, trade with care, invest with reasons.


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