ANZ Bank suggests a long-term trade strategy to sell CHF/JPY on any rallies towards 170, targeting a move towards 165. The bank believes that both the Bank of Japan (BoJ) and the Swiss National Bank (SNB) are far from policy normalization but sees potential JPY strength when Japan eventually moves away from negative interest rates.

Key Points:

• Long-Term Trade: ANZ recommends shorting CHF/JPY when it rallies towards 170, with a target move to 165.

• Policy Normalization in Japan: While the BoJ is not currently on a path towards policy normalization, ANZ expects there will be a time when negative interest rates in Japan are history. When that happens, ANZ suggests that shorting CHF/JPY could be an ideal, carry-cost-minimized method to capitalize on returning JPY strength.

• SNB Intervention Less Likely: ANZ points out that the SNB is notorious for intervening in currency markets. However, they believe CHF/JPY weakness is unlikely to prompt central bank intervention. The SNB's primary concern has been imported inflation, particularly from the U.S. and the Euro Area (EA).

• All-Time Highs: The CHF/JPY cross has been at an all-time high for some months, and with the Swiss franc (CHF) likely near the end of its tightening cycle, this cross may be well-positioned for shorting.

Conclusion:

According to ANZ, the CHF/JPY currency pair appears well-positioned for a long-term trade that takes advantage of potential JPY strength when the BoJ eventually moves away from negative interest rates. The bank recommends selling CHF/JPY on rallies towards 170 and targeting a downward move towards 165. Importantly, the SNB is unlikely to intervene to prevent weakness in this cross, making it a compelling opportunity for traders.