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MT5.com - Analysis of CHF/JPY for July 31, 2019

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Forex Analysis:::2019-07-31

Analysis of CHF/JPY for July 31, 2019

CHF/JPY has been correcting at the level slightly below 110.00 with a daily close since it had broken below in May 2019 amid impulsive bearish pressure. The price failed to push above it but could not sustain the pressure and led the price below 110.00 area again.

CHF is a safe-haven currency which enjoys demand in the troubled time amid risk aversion. Alternatively, with investors' confidence, the franc will lose value as investors seek higher yielding investments. The ECB monetary policy has an impact on CHF. The ECB is revising interest rates or its Quantitative Easing program, which could influence CHF/JPY. The Swiss National Bank (SNB) has limited options for stemming the franc's rise. Interest rates on sight deposit account balances are already negative, although a more negative rate is possible. In addition, SNB efforts to manage the Swiss franc have been criticized. Currency manipulation has become hot politics, particularly in the US where the president has been highly vocal on the subject. In 2017, the Economist magazine ranked Switzerland the world's worst currency manipulator.

The KOF Economic Barometer has increased in July, after the indicator value remained unchanged in the previous month. However, the barometer continues to indicate below-average momentum which indicates that the Swiss economy continues to be feeble. The monthly CPI is pending for this week and expected to decrease from 0.0% to -0.4% while the Manufacturing PMI is expected to decrease from 47.7 to 47.0

On the other hand, in two months, the national sales tax in Japan will be hiked to 10% from 8%. Past increases in the sales tax have proved challenging for the Japanese economy. Japan pushed back projections today for bringing its budget into surplus, in a sign Prime Minister Shinzo Abe's government is struggling to rein in massive public debt as the economy comes under increasing pressure. The pushback contains the forecast of achieving a surplus by one year to fiscal 2027, citing a downward revision to its outlook for GDP growth, inflation and tax revenue since its previous projections in January. Japan's debt burden is the industrial world's heaviest, at more than twice the size of its $5 trillion economy. Abe has put greater importance on growth to safeguard the fragile economy than fiscal reform. Recently, Japan downgraded its fiscal 2019 real GDP growth forecast to 0.9% from the previous value of 1.3% which affected JPY gains. This fiscal year's budget spending reached a record 101.5 trillion yen ($935.05 billion) including 2 trillion yen in steps to ease a pain from a planned sales tax hike to 10% from the current 8% in October.

Today Japan's Consumer Confidence report was published with a decrease to 37.8 from the previous figure of 38.7 which was expected to be at 38.5 but Housing Starts rebounded sharply to 0.3% from the previous slump of -8.7% which was expected to be at -2.2%.

TECHNICAL OVERVIEW:

The price settled down at the level slightly below 110.00 with a daily close where the Ascending Triangle pattern was observed while squeezing the price since it dropped towards 107.50 support area in April 2019. Though the price is seen pushing higher, the recent False Break above 110.00 is expected to lead the price lower again towards 107.50. As the price remains below 110.00 area with a daily close, the bearish bias is expected to continue. Otherwise, a daily close above 110.00 will lead to a strong counter move of the current bearish bias.

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