CHF/JPY in Rare 'Waterfall Mode', Counter-Trend Bounce Possible
The CHF/JPY currency pair has entered a rare 'waterfall mode' over the past week, where price movements are extreme and swift. According to data going back to mid-2018, this is one of the most oversold territories for Swissy-yen in history.
Historically, when the ATR 50 stretch indicator falls beneath -2.5 and RSI (14) is below 30, a counter-trend bounce often follows. In six previous episodes where these conditions were met, five of them resulted in higher prices three to five trading days later.
The yen has been strengthened by hawkish BOJ repricing, with implied overnight rates rising from 1.15% at the start of September to 1.24% today. Markets now price around 3.7 hikes by July next year, up from just over 3.2 at the beginning of the month.
US Treasury Secretary Scott Bessent has expressed confidence in Japan's policymakers, saying 'I am the house now.' The US has provided significant support for efforts to strengthen the yen, alongside Japanese authorities' record intervention.