The outlook for the Swiss National Bank & the Bank of Japan are really quite different.
The Bank of Japan is expected to exit it’s negative interest rate policy and start hiking rates around spring 2024. The Swiss National Bank is expected, by short term interest rate markets, to stop hiking rates with its inflation at 1.7%.
So, this is currency trading 101 – the JPY should strengthen on expectations of the BoJ hiking rates and the CHF should weaken as expectations fade for further SNB hikes. Does this mean a CHFJPY sell bias makes sense?
Well, hold on! The seasonals for the CHFJPY are extremely strong into the end of the year with an average return of 2.57% and a 70+% winning trade percentage. So, should this be a reason for pausing on CHFJPY shorts and looking at them in the New Year when the seasonals favour CHFJPY selling?
The major trade risk here will be from the two central banks and the incoming inflation data. Will the rate divergence be maintained?
Remember don’t just trade it, Seasonax it!