CHF/JPY Enters Rare 'Waterfall Mode' Amid Hawkish BOJ Repricing

The CHF/JPY pair has entered a rare state known as 'waterfall mode', where it's pushed into extreme oversold territory on the downside.

This has happened only six times since mid-2018, with five of those episodes being followed by a higher price three and five trading days later, and all six being higher after 10 and 20 sessions.

However, past performance is not indicative of future returns, and the current setup is more extreme than any of the thresholds used in that backtest.

The yen has been strong due to a hawkish repricing of Japan's interest rate outlook, with markets now pricing around 3.7 hikes by July next year, up from just over 3.2 at the start of the month.