CHF/JPY Forex Trading

If you have any experience at all with forex trading, you will be aware of CHF and JPY. These currencies, which represent the Swiss Franc and Japanese Yen respectively, represent two of the strongest, wealthiest, most resilient, and most investor-popular economies on Earth. While you might have seen these currencies paired with major currencies such as EUR and USD, you probably have not had too much experience with CHF/JPY.

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Put simply, CHF/JPY denotes the price of the Swiss Franc relative to the Japanese Yen at current market rates. More specifically, it describes how many Japanese Yen you need to purchase a single Swiss Franc. For example, if CHF/JPY is trading at 117.00, it costs 117 Japanese Yen to purchase one Swiss Franc on the global marketplace. Switzerland and Japan are two global titans of finance that are interconnected in surprising ways. Read on to find out everything you need to know about CHF/JPY forex trading. 

  • Symbol for CHF: CHf
  • Symbol for JPY: ¥

WHAT IS CHF/JPY FOREX TRADING?

Forex trading, which is one of the most important and widespread financial activities in the world, is simply the act of buying and selling various currency pairs in the hopes of profiting from incremental (or major) price changes in the values of those respective currencies.

When trading CHF/JPY, you are either buying in the hope that the value of the Franc will rise against the Yen, or selling in the hope that the Yen will appreciate against the Franc.

With CHF/JPY and many other similar currency pairs, it is often ideal to execute numerous trades in a single day and profiting on an accumulation of smaller price fluctuations, a strategy commonly known as day trading. 

History of the CHF/JPY Forex Pair

Switzerland is, by virtually every measure, the world’s banking capital and is the country that holds the world’s largest gold deposits and more than one-third of all private wealth on the planet.

This small Alpine country is not a member of the European Union, but its currency is intimately connected to the Euro, a fact that has been reflected in forex developments of the past twenty years.

The Swiss Franc was first introduced in 1850, as part of government efforts to unite the disparate cantons of Switzerland together under one flag.

CHF was originally pegged to the French Franc but is now a free-floating currency that is one of the most valuable, expensive, and in-demand on Earth, owing to Switzerland’s position as the capital of wealth.

The Japanese Yen has a similar historical pedigree to the Swiss Franc, as it too was introduced in the mid-19th century by a government that was determined to bring together a kaleidoscope of regional economies under one central authority.

Unlike the Franc, the Yen has been consistently devalued over the years, often as a result of deliberate Japanese policy as a means of keeping exports competitive.

Japan’s currency is generally more volatile than Switzerland’s but both are comparatively stable “safe haven” currencies that investors flock to in times of crisis. 

There are many benefits to trading CHF/JPY, such as: 

  • Protection from some of the volatilities of the US Dollar, as CHF/JPY can be directly traded without having to first convert to USD. 
  • A large degree of predictability, owing to well-known market correlations and a wealth of market data. 
  • Strong volatility, that can occasionally allow for substantial gains for savvy traders. 

Factors that Influence CHF/JPY 

CHF/JPY is a minor currency pair that is affected by myriad factors on a constant basis, the most important of which are: 

Interest rate differential: CHF/JPY is strongly positively correlated to higher interest rate differentials between the Swiss National Bank and the Bank of Japan. 

Global economic uncertainty: CHF/JPY are global “safe haven” currencies that are strongly affected by negative global economic sentiment. 

Domestic economic trends: data in either Switzerland or Japan that concerns employment rates, inflation, GDP, exports, trade deficits, or stock markets have a strong impact on CHF/JPY. 

The Role of CHF 

CHF is the currency of one of the world’s most important economies, as well as the country where a third of the world’s private wealth is held.

Switzerland is synonymous with stability, security, wealth, and safety, and this is reflected in the role of CHF as an in-demand safe-haven currency, which investors pile into when things go south.

The Swiss National Bank, or SNB, is responsible for monetary policy and its announcements have a major role on CHF prices. 

The Role of JPY 

Japan is the economic powerhouse of Asia, the world’s third-largest economy, and one of the world’s top high-tech exporters. The Yen is the world’s third most widely held reserve currency and is similarly a popular safe-haven currency, although investors tend to prefer CHF in times of crisis.

It is crucial to bear in mind that the Bank of Japan plays an active interventionist role in currency prices, meaning that central bank policy is probably the single most important factor in determining the price direction of the Yen.

Strategies on Forex Trading CHF/JPY 

Despite being safe-haven currencies, CHF/JPY tends to offer a surprising level of volatility. While this adds to its appeal, it makes it all the more important to approach this pair with a proper forex trading strategy in place. Here are some tips to keep in mind:

  • Stay on top of your brief: market fundamentals such as central bank announcements and GDP growth data have a huge impact on CAD/JYP, so do your homework.
  • Don’t forget the Greenback: although CHF/JPY is insulated from the Dollar, US monetary developments still have an important impact.
  • Monitor correlating currencies: price movements in currencies such as EUR, CNY, and GBP all correlate with CAD and JPY.
  • Have an exit strategy: the volatility inherent in CAD/JPY means that sudden price movements can have devastating effects, so always have a rigid stop-loss in place.

When to Buy or Sell CHF/JPY 

As a minor currency pair, you may find that CHF/JPY occasionally has liquidity problems, meaning that you may not be able to buy and sell when you want to, owing to a lack of demand.

Therefore, you should try to trade only when market activity for CHF/JPY is at its height, which is typically between 13:00 and 17:00 GMT when London and New York markets are simultaneously open.

More specifically, you should aim to execute CHF/JPY trades when you have an informed reason to believe the price of Swiss France will change relative to the Japanese Yen.

For example, let’s say that gold prices are due to rise substantially. This might boost the value of CHF, so you would hit BUY on CHF/JPY in the hopes that the price of CHF will rise against JPY, after which point you could sell to make a profit. 

How to Trade CHF/JPY 

Although CHF/JPY is a minor currency pair, trading this is simple and straightforward. Despite occasional illiquidity, the demand for CHF/JPY is generally very strong, and trading these currencies directly is done on a massive scale every day.

This is especially true right now when global economic sentiment is more uncertain than it has been in decades. As long as you have a trusted and licensed UK forex broker that uses accurate market data, you can freely trade CHF/JPY in real-time. 

Profit With CHF/JPY 

CHF/JPY is a surprisingly volatile pair, and this is evident when you see the dramatic ups and downs of this pair over the years. By timing trades at the right moment, you might get extremely lucky and make substantial profits.

However, the day-to-day movements of CHF/JPY are relatively modest, meaning that your goal for daily profits should be to profit on incremental price fluctuations throughout the day.

Always pay close attention to how similar currency pairs are behaving in order to get a sense of where CHF/JPY is headed. 

Close Your Position to Take a Profit or Cut a Loss 

Owing to the surprising volatility of CHF/JPY, which can arise from nowhere, it is important to remember that any incremental gains you make on this pair can be instantly wiped out if things go south. In order to reduce the chance of this happening, you should ensure that your forex broker puts a stop-loss on your account. This will automatically close your position if your losses reach a certain level, allowing you to cut your losses and get out instantly. 

Chose a Broker & Open an Account 

When trading a major currency pair such as CHF/JPY, choosing a trusted and licensed broker is absolutely essential. 

A quality broker will work with expert data and resources to help you make informed trades. They will offer direct market access to allow you to buy and sell at exactly the moment that you want to.

They will hold valid licenses from trusted financial regulatory bodies, to guarantee the safety of your money. To find out which brokers offer all of these crucial elements, make sure to check out our reviews of trusted forex brokers today.

CHF/JPY Trading Risks 

While there are many benefits of trading CHF/JPY, there are also some risks that any forex trader should be aware of, such as:

Lack of liquidity: as a minor currency pair, there can often be a lack of demand in the CHF/JPY market, restricting the freedom of your trades.

The safe-haven trap: since both CHF and JPY are global safe-haven currencies, it can be difficult to predict which one will appreciate in times of turmoil.

Unpredictable volatility: while volatility can be a very good thing in forex trading, it has to be said that periods of volatility in CHF/JPY tend to come from nowhere.

Leverage risks: leverage offered by brokers allow you to borrow capital to increase the size of your position. While this can increase potential profits, it can also seriously maximize losses.

Conclusion

The CHF/JPY currency pair encapsulates all of the benefits of safe-haven currencies with an added volatility that is rare for pairs such as this. In addition, simply following the right market data can be more than enough for a sustainable CHF/JPY forex trading strategy, which is exactly why this pair is worth your time if you are a beginner forex trader.