CHF/JPY surges back to highs as breakout pressure builds

• CHF/JPY nears key resistance at record highs
• BOJ April hike odds fluctuate, now near 42%
• Franc supported as energy risks ease

Summary

As BOJ hike odds swing and Middle East developments continue to influence sentiment, CHF/JPY has returned to test the top of its range, supported by a strong bounce from the 100DMA and strengthening upside momentum.

Bullish Trend Faces High Hurdle

After threatening to break the strong bullish trend in place since February 2025 in the early stages of the Iran war late last month, CHF/JPY has resumed its bullish trajectory over the past fortnight, bouncing strongly from beneath the 100-day moving average and springboarding back towards the record high of 204.00 set earlier this year, taking out the 50-day moving average along with resistance at 200.30 and 202.64 along the way.

Source: TradingView

With RSI (14) trending higher above 50 while MACD has flipped positive after crossing the signal line from below last week, the message from the oscillators is increasingly bullish, with strengthening upside momentum improving the prospects of a breakout sticking.

However, the bears have form at 204, having already repelled two bullish moves in the recent past. A doji printed on the daily chart on Tuesday, completing the second leg of a three-candle evening star pattern, putting emphasis on the price action on Wednesday. A close beneath 202.64 would strengthen the bearish reversal signal, especially given it would follow a strong bullish move beforehand.

A close beneath 202.64 would also see the price settle more than halfway down Monday’s bullish candle, completing the evening star. That would put the 50-day moving average, the February 2025 uptrend and 200.30 support on the radar for potential downside targets. A clean break of the latter two would signal a possible trend change, opening the door to further downside should that scenario eventuate.

If the bullish price action and momentum picture delivers a breakout, which is currently the preferred setup, longs may be considered above 204.00 with a tight stop beneath for protection. A close above 204 would strengthen conviction, with the preference to wait for subsequent topping patterns to assess whether to hold, cut or reverse rather than nominating a specific extension target.

Middle East and BOJ to shape direction

The macro backdrop helps explain the price action seen over the past two sessions, with this week’s BOJ communication and Middle East developments feeding directly into the moves.

BOJ Governor Kazuo Ueda’s comments early in the week, delivered via his deputy, appeared aimed at reintroducing two-way optionality after markets had moved aggressively towards pricing an April hike, weighing on the yen on Monday even as the USD softened.

That saw the yen underperform against a basket of currencies, but the shift was partially reversed on Tuesday, with reporting suggesting the BOJ may lift its inflation forecasts due to higher oil prices, putting markets back on the scent of a potential hike and helping the yen strengthen.

The combination leaves the BOJ weighing the inflation impulse from higher energy prices against the hit to growth, particularly given Japan’s reliance on imported energy, with swaps traders putting the probability of an April hike around 42%, roughly the middle of the range seen this week.

Source: Bloomberg

For the franc, support has come from improving sentiment around a potential US-Iran de-escalation, reducing some of the energy supply risk embedded in the Swiss outlook while allowing it to revert towards its traditional safe haven role.

For CHF/JPY bulls, the optimal outcome would be no re-escalation in the Iran conflict and no rate hike from the BOJ later this month, a mix that would likely keep the yen under pressure while allowing the franc to stay supported.

Naturally, the opposite outcome would favour downside, with renewed energy supply concerns and a BOJ hike combining to lift the yen via higher funding costs while also pressuring carry trades.

While some of that shift has already been seen in price action this week, the balance of headlines still leans towards bullish CHF/JPY setups.