Japanese Yen's Decline Deepens Against Swiss Franc Amid Intervention Speculation

Summary:

The Japanese yen plunges to a 38-year low against the Swiss franc, reaching 179.40 per CHF amid ongoing doubts about the Bank of Japan’s monetary policy normalization.

BUY CHFJPY

Close Time

CLOSED

179.300

Entry Price

181.000

178.000

199.643 -1.347 -0.67%

44.4

Pips

Profit

178.000

179.744

Exit Price

179.300

Entry Price

181.000

The Japanese yen continued its relentless slide, ploughing to a fresh 38-year low against the Swiss franc on Tuesday, hitting 179.40 per CHF. This ongoing depreciation reflects mounting doubts about the Bank of Japan's (BoJ) commitment to normalizing monetary policy, as market participants remain skeptical about any imminent policy shifts.

The yen's downward trajectory has shown no signs of abating over the past month. Interestingly, this latest phase of depreciation has seen a notable absence of verbal interventions from Japanese officials. Historically, such rapid declines have often prompted Japanese authorities to issue warnings or even intervene directly to stabilize the currency. However, this time around, Japan's finance minister, Shunichi Suzuki, has only offered standard reassurances, stating that the government continues to monitor the market closely.

Despite the yen's significant weakening, Suzuki has not issued an explicit warning of potential intervention. This restrained approach could be attributed to various factors. One possibility is that Suzuki may be waiting for the newly appointed vice finance minister for international affairs, who will oversee exchange rate policy, to assume his post on July 31. Alternatively, it might indicate that Japanese authorities have raised their tolerance level for FX intervention, allowing the yen to adjust more freely in the market.

The BoJ's ambiguous stance on monetary policy continues to fuel uncertainty. While the central bank has indicated a potential shift away from its ultra-loose policy, it has not provided concrete timelines or measures for implementing such changes. This ambiguity has left investors questioning the BoJ's resolve to address the yen's weakness and normalize its policy framework.

The yen's vulnerability is compounded by the BoJ's ongoing commitment to massive bond purchases, which contrasts sharply with the tightening stances of other major central banks. This divergence in monetary policy paths has intensified downward pressure on the yen, as higher yields in other markets attract capital away from Japan.

Domestically, Japan faces a complex economic landscape. Inflation remains subdued, and wage growth has been sluggish, limiting the BoJ's ability to shift towards a more hawkish stance. Additionally, Japan's export-driven economy has benefited from a weaker yen, which boosts the competitiveness of Japanese goods abroad. This dynamic creates a challenging backdrop for policymakers, who must balance the benefits of a weaker yen with the risks of excessive depreciation.

Technical Analysis

On the technical front, the CHF/JPY pair has broken out of a range it had been trading in since June 24. The price has pushed above key moving averages, including the 20, 50, and 100 EMAs, suggesting a bullish momentum. Currently, the pair is awaiting a pullback to retest the broken range resistance around 179.00. If the price rejects this level, it could provide a long opportunity targeting the 181.00 mark.

The Relative Strength Index (RSI) supports this bullish outlook, remaining in positive territory and indicating strong momentum. However, traders should remain cautious, as any signs of intervention by Japanese authorities could introduce significant volatility

TRADE RECOMMENDATION

BUY CHFJPY

ENTRY PRICE :179.30

STOP LOSS : 178.00

TAKE PROFIT : 181.00

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Japanese Yen's Decline Deepens Against Swiss Franc Amid Intervention Speculation

Risk Disclosure