A few days ago I took a look at the CHFJPY (see: Forex Technical Analysis: CHFJPY continues trend higher). The pair was near the highs, trending higher but had levels outlined that would define risk should the trend start to fade.

Since then the price has corrected sharply lower on a weaker CHF (potential intervention) and a correcting JPY as well.

CHFJPY is testing the 100 hour MA at the 122.43 level.

CHFJPY is testing the 100 hour MA at the 122.43 level.

Today the pair opened lower, dipping below the 200 hour MA and the 50% of the move up from the November 10th low to the November 20 high at the 121.132. The dip below these levels should have solicited more technical selling. It was a key level. It did not.

This failure gave the buyers the go ahead to go back in and the pair has moved back higher. The pair is now testing the 100 hour MA (blue line) at the 122.43 level. The pair is stalling at the area, but the USDJPY remains bid (and trades near the highs). Meanwhile the USDCHF is near the lows. This keeps the CHFJPY supported. If the 100 hour MA is broken the 122.82 becomes the next bullish hurdle. IF the level holds look for a rotation to the 121.842 area (see 38.2% level in the chart above).

Technically this pair should find sellers right here at the 100 hour MA. Typically, when the 100 and 200 hour MAs are wide like this (see spread between the 200 hour MA – green line – and the 100 hour MA (blue line) there is some trading between the “goal posts” before there is a break (either higher or lower). So this is the topside goal post to lean against. Watch this level closely for some profit taking/selling. Risk can be defined and limited.

Fundamentally, the pair has some forces that can cause volatility. The JPY remains weak from the stimulus and fundamentals. The CHF has attracted safe haven flows, but we also know the SNB will not tolerate a stronger CHF. Indeed the EURCHF is higher and a safer distance from the 1.2000 level (it is at 1.2024 currently). Add to the equation the Gold referendum in Switzerland at the end of the month and you have some event risk which can cause volatility. So if you venture in the pair, tread softly and have a stop loss just in case.