While it may seem as if the waters are once again safe to dive back into since the G20 meeting has passed; but the market may not be done with this event. The deliverables the group has given the market are questionable; and therefore the future of risk appetite is blurred. This creates a dangerous situation for an attractive CHFJPY range setup.
[B]Why Would CHFJPY Hold a Range?[/B]
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· [B][U]Levels to Watch:[/U][/B]
[B]-Range Top: 89.00 (Range High, Fib, SMA)[/B]
[B]-Range Bottom: 82.25 (Fibs, Trend, Pivot)[/B]
· There is a sense that risk has eased with positive commentary from the G20; but this boost may be temporary. The statement did not provide many details to suggest that the broad-sweeping efforts officials plan to make can actually be implemented. And, a turn to the status quo could actually cause a volatile deflation in sentiment (as well as some currencies). With the market still unsure of which currency the definitive safe haven in the FX world, this may become a key driver for CHFJPY.
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· The sharp rally from this pair today [threatens a bullish break](http://www.dailyfx.com/story/currency_crosses/currency_crosses/Yen_Crosses__Topping_Processes_1238617037305.html) on a rising trend that has established its influence over price action for more than two months. However, this volatile move has stalled in a range of highs around 88 – a level further bolstered by a long-term Fib and the nearby 200-day SMA.
[B][I]Suggested Strategy[/I][/B]
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· [B][U]Short[/U][/B][B]: Half sized entry orders will be placed at 87.40 – set below spot to establish direction.[/B]
· [B][U]Stop[/U][/B][B]: Our initial stop will be set at 88.4, which covers the range but not potential volatility. To secure profit, move the stop on the second lot to breakeven when the first target hits.[/B]
· [B][U]Target[/U][/B][B]: The first objective equals risk (100) at 86.40 while the second[/B][B] target will be 85.40. [/B]
[B]Trading Tip[/B] – While it may seem as if the waters are once again safe to dive back into since the G20 meeting has passed; but the market may not be done with this event. The deliverables the group has given the market are questionable; and therefore the future of risk appetite is blurred. This creates a dangerous situation for an attractive CHFJPY range setup. What’s more, momentum could pose a technical problem for the strained boundaries of the pair’s congestion pattern. Today’s rally pushed spot beyond the top of the range high that was established between last week’s highs and the pivot going back to October and November. With risk this high and the weekend approaching, this is a setup only for those that are comfortable with high risk. Regardless of appetite for risk, we have tried to setup a strategy that improves the trade’s profile. With an entry that is below current spot, we ensure that the pair at least takes a break from pushing new highs and is showing potential for a reversal. The stop is not wide considering volatility; but it is notionally significant so I will lower position size. To further avoid unnecessary risk, all open orders will be canceled before the weekend.
[B]Event Risk for Switzerland and Japan[/B]
[B]Switzerland –[/B] The G20 statement, upon multiple readings, had perhaps a greater influence over the Swiss franc than any other currency. Not only does the collective of leaders’ focus on reviving growth and lending impact the Swissie through its safe haven status; but the vows that tax havens would be sanctioned has a particularly heavy meaning for an economy that is considered the world’s bank. What’s more, the communiqué vowed that its members would not devalue their currencies as it was considered a blatant attempt at protectionism. This creates a complex influence on the franc, and the market will have to work out its influence with time and advancements in global stimulus efforts. There will also be a few notable indicators to cross the economic docket; but the data’s market moving influence is questionable. Inflation and jobless numbers from last month is an important gauge for growth trends; but international politics and general risk sentiment is likely to overwhelm these relatively staid readings.
[B]Japan[/B] – The yen is deeply vested in the health of the global economy and broad risk sentiment; so the market’s unfolding response to the G20 statement could have a substantial impact on the Japanese currency over time. The immediate reaction to the statement seems to have led the safe haven currencies lower as confidence is bolstered on promises to boost fiscal stimulus, promote regulation and prevent protectionism. However, a critical look at the statement reveals that there are few details offered along with these sweeping objectives to suggest they will actually be implemented – much less end in success. Whether the market comes to this same conclusion is a pressing question. And, while there are plenty of market movers scheduled next week, they don’t pose a real threat to trend.
[B]Data for April 3 – April 10[/B]
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[B]Data for April 3 – April 10[/B]
[B]Date (GMT)[/B]
[B]Swiss Economic Data[/B]
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[B]Date (GMT)[/B]
[B]Japanese Economic Data[/B]
Apr 3
Consumer Price Index (MAR)
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Apr 6
Leading Index (FEB P)
Apr 9
Unemployment Rate (MAR)
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Apr 7
BoJ Target Rate
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Apr 8
Eco Watchers Survey (MAR)
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Apr 8
Machine Orders (FEB)