CHF/JPY Reaches Historic Extremes, Bounce Risk Rises
The CHF/JPY exchange rate has entered 'waterfall mode' after experiencing an extreme downward stretch, pushing it into oversold territory on both ATR and RSI indicators.
A backtest of similar episodes shows that while the initial results were mixed, the further out one goes, the stronger the historical bias becomes towards a rebound. In fact, five out of six episodes were followed by higher prices three and five trading days later, with all six being higher after 10 and 20 sessions.
The yen has been bolstered recently by hawkish BOJ repricing, record intervention, and US support from Treasury Secretary Scott Bessent, who expressed confidence in policymakers' efforts to strengthen the yen. However, despite these positives, macro headwinds such as energy insecurity and deteriorating terms of trade remain.
The pair is expected to be volatile in the short term, with US PPI and CPI data due out this week potentially shifting the US rates outlook and impacting USD/JPY and broader yen volatility. Looking ahead, a long-term support zone near 188.80 will be crucial for any potential bounce.