RBC Recommend Long CHF/JPY As their Trade Of The Week

RBC think “short JPY is the right trade into the BoJ meeting this week, but USD/JPY price action is likely to be dominated by the U.S. CPI and Fed outcome before we get to the BoJ, so we play JPY weakness on a risk-neutral cross.”

• “Expectations for YCC relaxation at this week’ s meeting have diminished greatly, but those expectations have simply rolled into July.”
• “The risk is that the Ueda’s press conference suggests no imminent change in policy, pushing that expectation further into the future and maintaining JPY underperformance.”
• “Although there is 60bp of cumulative tightening priced in for the SNB (40bp for next week’s quarterly meeting), we note that would only take rates into line with the 2% neutral rate that President Jordan cited in comments over the weekend.”
• The recommendation came with CHF/JPY sitting at Y154.48, with a target of Y157.50 and a stop set at Y153.00.