CHF/JPY: Sell on rallies – OCBC

CHF/JPY fell sharply from above 185-levels last Fri to trade a low of 182.70 low this morning. Cross was last at 182.00 levels, OCBC's FX analysts Frances Cheung and Christopher Wong note.

SNB-BoJ policy divergence can push the cross to the downside

"The triggers were downside surprise to US payrolls, which saw JPY strengthened while the unexpectedly high 39% tariff rate on Swiss imports to US weighed on CHF. The divergence saw the cross fell sharply. Swiss government has indicated that it will pursue discussions with US, if necessary, beyond the 7 Aug deadline. Potentially, lawmakers are looking at options including the purchase of US LNG or further investments by Swiss companies in the US."

"US is one of Switzerland’s top export markets for chocolates, watches, pharmaceuticals and Swiss is the 6th largest investor in US. Should the tariff go into effect, Swiss economic growth may be impacted, and inflation may ease, leading to higher likelihood of SNB lowering the rate into negative (SNB policy rate is already at zero). Bearish momentum on daily chart intact while RSI fell."

"Support at 181.30 (23.6% fibo retracement of 2025 low to high), 180.80 (50 DMA) and 178.30 (38.2% fibo). Resistance at 183.20, 184.40 (21 DMA). We look for opportunities on rally to fade into. The 12% run-up this year may also provide an opportunity to enter short, from a risk-reward perspective. SNB-BoJ policy divergence play could return, and this can underpin the direction of travel to the downside."