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CHF/JPY Trading Guide: How to Trade CHFJPY

Date Modified: 17/06/2024

When trading the Forex market, one can choose between different kinds of Forex pairs.

Major pairs, like the EUR/USD (EURUSD), are usually the most popular Forex pairs and always include the most widely traded currencies, while minors are currency pairs of strong economies (excluding the United States) that tend to be less traded, such as the CHF/JPY (CHFJPY), but that could still offer some interesting opportunities.

Let’s take a close look at the CHFJPY currency pair, whose exchange rate converts the Swiss Franc (CHF) to the Japanese Yen (JPY):

An illustration of the Japanese and Canadian flags in front of a trading chart.

TL;DR

  • The CHF/JPY represents the Swiss Franc, which is the national currency of Switzerland, against the Japanese Yen, which is the official currency of Japan.
  • CHF is an abbreviation for Confoederatio Helvetica Franc.
  • The Japanese Yen (JPY) and the Swiss Franc (CHF) are both safe-haven assets.
  • According to the 2022 Triennial Survey from the Bank for International Settlements (BIS), the Japanese currency was the 3rd most traded currency in the world after the American Dollar (USD) and the Euro (EUR), while the Swiss Franc came in at 8th.
  • As of April 2022, the JPY represented 16.7% of all Forex trades, while the CHF represented 5.2% of all FX positions.
  • It is possible to trade the CHF/JPY currency pair through currency Exchange-Traded Funds (ETF), the spot market, Forex futures and options, as well as Contracts For Difference (CFD) on Forex pairs.*

*Availability depends on regulation.

What Does the CHF/JPY Currency Pair Represent?

The CHF/JPY currency pair represents a Forex pair where the Swiss Franc (CHF) is the base currency and the Japanese Yen (JPY) is the counter currency.

Both currencies are considered safe-haven currencies, mostly thanks to their reliable and stable economic and political systems. A safe-haven currency means that it represents a preferred choice for traders in times of higher market uncertainty and volatility.

Understanding the Japanese Economy

A recognised leader in high-tech innovation, Japan consistently ranks among the world's top for technological advancement. Since February 2024, Japan is no longer the 3rd largest economy in the world based on Gross Domestic Product (GDP), as it was replaced by Germany. The country currently stands at the 4th position thanks to several factors:

Firstly, Japan fosters a strong culture of research and development (R&D) investment. They dedicate a significant portion of their GDP to R&D, prioritising innovation and discovery.

Secondly, the country boasts a highly educated and technically skilled population, which is a crucial element for developing and implementing cutting-edge technologies, adding a layer of "savoir-faire" (know-how) and expertise to their innovative spirit.

Finally, the Japanese economy strategically invests in promising sectors like robotics, artificial intelligence, and advanced materials science, further propelling their technological edge.

However, Japan's economic success isn't solely based on high-tech services, as it also heavily relies on exports of manufactured goods like cars and electronics. The country also depends on energy commodities imports to meet domestic needs.

Understanding the Swiss Economy

For years, the Swiss economy has demonstrated a certain ability to adjust to changing circumstances, allowing the country to weather economic storms with shallower recessions and facilitate faster recoveries compared to other developed nations among their OECD peers.

This strength stems from a three-fold approach: a flexible economy that minimises the impact of downturns, a robust set of economic tools for managing economic cycles, and a solid fiscal framework with low public debt by international standards (a public debt-to-GDP ratio of only 37% in 2023).

Beyond economics, Switzerland's political stability, neutrality, and commitment to the rule of law create a relatively predictable environment for businesses and investors, boosting confidence in the Swiss Franc.

Additionally, a consistent trade surplus and a thriving financial services sector further contribute to the country's economic health and currency stability. The remarkably low unemployment rate is another sign of Switzerland's strong foundation for economic well-being.

What Is CHF/JPY CFD Trading?

CHF/JPY CFDs trading involves buying and selling the Swiss Franc (CHF) against the Japanese Yen (JPY) to take advantage of changes in the exchange rate according to market conditions (bull vs bear market) without owning the underlying currencies.

Traders can "go long" (buy the CHF/JPY pair) if they believe the Swiss Franc will strengthen relative to the Yen, or "go short" (short-sell the CHF/JPY) if they expect the Franc to weaken.

7 Potential Factors Influencing the CHF/JPY Forex Pair

Here are some factors that can move the Forex market, in general, and the CHF/JPY in particular:

  1. Economic Data Releases. Major economic statistics about growth, inflation, employment, as well as consumer confidence and spending, among others, can influence the Swiss and Japanese economies and provide insight into local and global economic climate, which can impact decisions from central banks and influence the CHF/JPY.
  2. Interest Rate Differentials. Monetary policies and interest rates decisions from the Bank of Japan (BoJ) and the Swiss National Bank (SNB), as well as from the European Central Bank (ECB) and the Federal Reserve (Fed), can affect the demand and supply for each currency included in the Forex pair.
  3. Political Events and Geopolitical Tensions. Political events, such as election, and geopolitical tensions can influence the CHF/JPY pair, as both currencies are seen as safe-haven assets. Additionally, geopolitical tensions can reshape global trade relationships, leading to potential changes in the Forex market.
  4. Wars, Natural Disasters, and Other Unexpected Events. Mother nature, armed conflicts, and unexpected events like pandemics can strongly influence a currency depending on the impact of these events on growth prospects. Additionally, the uncertainty surrounding the impact of these events can sometimes boost demand for safe-haven currencies.
  5. Commodity Prices. Because Japan is ​​an important energy importer, commodity prices variations can have an impact on its money inflow and outflow, which can impact the value of its currency against its peers.
  6. Currency Carry Trading. Because the Japanese have very low interest rates, it is often a top pick in currency carry trades. Any major changes in the Japanese monetary policy trajectory could influence the use of the JPY in carry trade strategies.
  7. Traders’ Sentiment. Market psychology and traders’ emotions can have a strong impact on the CHF/JPY depending on the main emotions driving the pair (euphoria, panic, etc.).

CHF/JPY Price Prediction

While predicting the way the CHF/JPY exchange rate will behave is impossible, considering the factors mentioned earlier can better equip you to identify potential opportunities. You should also take into account recent CHF/JPY trends and price movements even though past performances cannot reflect future results.

Looking historically, the CHF/JPY pair has trended upwards significantly since 2020 (over 55% increase between 2020 and April 2024). This rise was largely driven by the weakness of the Japanese Yen due to its negative interest rate policy, contrasting with other major economies raising rates to combat inflation in recent years.

However, with the Bank of Japan ending its negative rates era in 2024 and potentially shifting towards tighter monetary policy moving forwards, this dynamic might change.

Analysing CHF/JPY Price Movements: Technical Analysis vs Fundamental Analysis

Traders analysing the CHF/JPY pair can use a range of tools to determine if they should buy or short-sell the currency pair. They can focus on technical analysis using charts, or on fundamental analysis keeping an eye on the economic calendar. They can of course use a combination of both analysis methods and even add sentiment analysis, gauging the market psychology.

Trading CHF/JPY Using Technical Analysis

Using technical analysis on the CHF/JPY aims at understanding the pair's price action behaviour. This involves studying historical price movements alongside current prices to identify trends, pinpoint crucial support and resistance levels, and potentially predict future price movements.

Technical analysts have a toolbox of indicators to achieve this. Some popular ones for studying the CHF/JPY include the Relative Strength Index (RSI) and the Slow Stochastic Indicator to gauge overbought or oversold conditions, and Fibonacci extensions to identify potential price targets.

Trading CHF/JPY Using Fundamental Analysis

Fundamental analysis examines the big picture economic, political, and social factors that influence Switzerland’s (CHF) and Japan's (JPY) economies. These factors impact a country's monetary and fiscal policies, as well as its growth prospects, which in turn can affect the CHF/JPY currency exchange rate.

To stay informed about the economic health of both countries, traders using fundamental analysis closely monitor and trade economic data releases. Important news events include growth, inflation, and employment data, as well as central bank decisions.

Examples of CHF/JPY Trading Strategies

Let’s take a look at 3 popular trading strategies you can consider when trading the CHF/JPY Forex pair, keeping in mind your trading experience, risk tolerance, and trading goals:

CHF/JPY News Trading

Using news trading on the CHF/JPY involves trading short-term price movements caused by the release of economic data and central bank announcements that might impact the Swiss Franc and Japanese Yen.

Traders following this strategy aim to enter and exit positions quickly based on the actual number released, their interpretation of the news and its potential impact on the currency pair. Strong economic data tends to strengthen a currency, while weak data can cause it to weaken.

Usually, traders will look at the following releases: Gross Domestic Product (GDP), Consumer Price Index (CPI), Personal Consumption Expenditures (PCE), Consumer Confidence Index (CCI) and Purchasing Managers' Index (PMI), as well as interest rate decisions.

CHF/JPY Range Trading

CHF/JPY range trading focuses on capitalising on price movements within a specific trading range. The idea is to buy near support (the low end of the range) and sell near resistance (the high end of the range). Of course, the CHF/JPY can break out of the range in either direction, so traders should use risk management tools to protect their capital. This type of trading is often used by swing traders who tend to accumulate profits within an established range.

CHF/JPY Breakout Trading

Breakout trading with CHF/JPY aims to capture price jumps after the pair consolidates within a range. A breakout above resistance suggests a bullish trend might continue, while a break below support hints at a bearish continuation. However, false breakouts are common, so traders often look for confirmation signals to validate the breakout, such as increased trading volume.

​​If you’re ready to put these CHF/JPY trading strategies into practice, you can consider trading CFDs on CHF/JPY with Plus500.

CHF/JPY Trading - Frequently Asked Questions (FAQs):

Is the CHF/JPY a good pair to trade?

Considering which currency pair to trade depends on your trading experience and knowledge, as well as how much risk you're comfortable with, and what your trading goals are. While the CHF/JPY FX pair isn't one of the major currency pairs, it's often considered a well-liked option for traders who want to deal with safe haven currencies.

How can I manage risk while trading the CHF/JPY pair?

The best way to manage risk while trading the CHFJPY pair is to build a solid trading foundation and have a trading plan to follow, as this allows you to have a more disciplined approach to trading Forex. You can also use money management tools such as stop-loss, trailing stop, guaranteed stop order, take-profit and trading alerts.

When can I trade the CHF/JPY?

The Forex market is open around the clock from 5:00 PM EST on Sunday until 5:00 PM EST on Friday, which means you can trade the CHF/JPY pair whenever you want during that time. However, there are moments during the day when the currency pair might be more liquid and volatile, which could potentially bring more trading opportunities. The most active market hours for the CHFJPY pair are during the overlaps between the Asian and the European trading sessions (from 3:00 AM to 5:00 AM EST) and the European and American sessions (from 8:00 AM to 12:00 PM EST). The CHFJPY can also move when significant economic data about Switzerland and Japan is released.

What drives the CHF/JPY exchange rate?

The most important factor influencing the CHF/JPY exchange rate is the central bank of both countries. Elections, political events, natural disasters, wars, and economic data are other factors that can affect the price of this currency pair.

How can I start trading the CHF/JPY FX Pair?

To start trading the currency pair, you need to have a good understanding of Forex fundamentals and a sound and reliable trading plan with money management rules. After understanding how to trade the forex pair, you may consider opening a CFD trading account with Plus500.

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