Valerie MedlevaWitnessing today’s global political and economic turbulence, many investors and traders want to diversify their investment portfolio as much as possible. Luckily, when it comes to the forex market, there are a plethora of options one can choose from, including the world’s major currencies, such as USD, EUR and GBP.
Usually characterised as “safe havens”, the Swiss franc and the Japanese yen represent strong and stable economies of two highly developed and influential countries – Switzerland and Japan. However, for the past few years, the CHF/JPY rate has been nothing else but volatile.
Not sure how the CHF vs JPY pair is set to perform in the foreseeable future? Let’s take a glance at its latest performance and the CHF/JPY forecast for 2020 and beyond to get you prepared for what the future holds.
The CHF/JPY pair overview: back to the basics
The currency pairing of the Swiss franc against the Japanese yen is favoured by many in the foreign exchange market, even though it does not have large trading volumes and makes up only 5% of the total market turnover. The CHF/JPY pair represents how many Japanese yen – the quote currency – are needed to buy one Swiss franc – the base currency.
The economies of both countries, Switzerland and Japan, have been developing at a rapid pace ever since World War II. Switzerland has become an international financial centre, while Japan has thrived as a locomotive of innovation and high technology. The unemployment rate in both countries remains one of the lowest in the world.
Why do traders choose this forex instrument? The CHF/JPY pair is a good example of what's known as a cross-currency pairing. It means that it is traded directly, without being first converted into the U.S. dollar. Therefore, directly exchanging Japanese yen for Swiss francs protects forex traders from volatilities associated with the U.S. dollar. Moreover, once incorporated in one’s investment portfolio, the pair can serve as a hedging tool against fluctuations in other international currencies.
Also, due to their low interest rates and unique financial properties, both the Swiss franc and the Japanese yen are known to be funding currencies and safe-haven assets. As a result, many international investors often turn to CHF and JPY during times of increasing market instability.
Factors that influence the CHF/JPY rates
There are many factors that have a great impact on the value of the Swiss franc and the Japanese yen in relation to each other, as well as other currencies.
The CHF/JPY pair is very susceptible to various major political and economic events that take place not only in the home countries but also around the globe. For this reason, it may be rather difficult to make CHF/JPY predictions and forecast the future of its price chart.
However, there are a few factors that you may want to keep your eyes on when investing in this forex major. For instance, employment figures, gross domestic product, retail sales, industrial production, inflation, export and import data or economic and political crisis in either nation can have a significant influence on the currency pair.
Moreover, the CHF/JPY pair is affected by the interest rate differential between the Swiss National Bank and the Bank of Japan. Higher interest rates tend to have a positive effect on the currency, at least in the short term, and vice-versa.
Although the U.S. dollar is not present in this currency pair, nevertheless, it has a significant impact on it. Many traders believe that by combining the two charts of both USD/JPY and USD/CHF in one, you can get an approximate picture of the CHF/JPY chart.
As the US dollar has a substantial influence on both currencies, it is, therefore, necessary to take into account the main US economic indicators, when predicting the further price movement for the CHF/JPY pair. These, among others, include country’s GDP, unemployment, job creation and interest rates.
Even though the market movements of this currency pair tend to be rather volatile, the pair can offer great opportunities for experienced investors and traders looking for a diversification tool to move away from the forex majors, such as EUR/USD, EUR/GBP, GBP/USD or USD/JPY.
CHF/JPY analysis: what historical charts look like
Let's take a closer look at the CHF/JPY rate trend from 1993:
From 1990 until mid-1995, the CHF/JPY pair had been mainly in the downtrend. In August of 1995, it reached the resistance line and made a breakthrough. However, it was short-lived. Witnessing several ups and downs, the pair took a downward course in mid-1998, reaching its absolute minimum of 58.75 in September 2000.
After that, it began its upward movement, which lasted until the beginning of the infamous crisis of 2008. Unlike other currency pairs, the CHF/JPY rate started to fall only in August 2008. It then took it another 4 years to finally gain upside momentum in 2012, hitting its all-time high of 136.96 in January 2015.
Another sharp decline happened in June 2015, resulting in the CHF/JPY rate falling to 102.30 in a year.
Ever since then, the pair has seen lots of volatility, characterised by multiple price fluctuations. Through 2019, the pair’s average so far is set at 109.70, with the highest rate of 112.20 and the lowest of 107.20.
At the time of writing, on October 18, 2019, the CHF/JPY pair traded in the range of 109.800 – 110.150.
The CHF/JPY forecast: what to expect in the years ahead
In 2019, both the Swiss franc and the Japenese yen have been rather volatile, reflecting continuous escalations and de-escalations in the global political and economic tensions.
Based on the forecast provided by Walletinvestor.com, the CHF/JPY pair is anticipated to continue the bearish trend. The online forecasting service refers to this currency pairing as a potentially “bad, high-risk 1-year investment option”. Taking into consideration their CHF/JPY forecast, your current investment in the pair may be devalued in the near future.
Here is what their Swiss franc/Japanese yen forecast 2019 - 2020 looks like:
In regards to short-term perspectives, according to Trading Economics analysts expectations and global macro models, the CHF/JPY outlook seems rather flat, with the pair expected to trade at a rate of around 110 by the end of this quarter.
Here is their franc to yen forex rate prediction for the next few months:
Looking forward, they also estimate it to trade at the same level of 110 in the next 12 months.
The CHF/JPY technical analysis conducted by TradingView.com shows real-time ratings for the pair for one month. Here are the results:
On the other hand, another popular forecasting service, Gov Capital, has a much more bullish vision. Warning investors that this prediction may be fundamentally flawed, it anticipates that by the end of October 2024, the CHF/JPY rate may reach 712.409.
This is what their one-year CHF/JPY forecast looks like:
Taking into consideration the latest forecasts as well as the global uncertainty, it may not be the best time to invest in the CHF/JPY pair.
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