TD Securities Recommend Short CHF/JPY Position

TD Securities have added a short CHF/JPY trade to their FX model portfolio, entering at Y143.05, targeting Y136.00 with a stop loss set at Y147.25.

• They note that “while CHF has been one of the best performing "relative" currencies over the past 3 months, we think it is topping against the JPY. We use another push towards Y144 as a nice entry point, especially as USD/JPY revisits Y140.”
• “For starters, CHF is now the most overbought G10 currency - by a significant margin.” On their positioning framework “CHF sits in the 97th percentile over the past 6 months, underscoring a net max long position, while JPY sits in the 4th percentile.”
• “Moreover, the cross has overshot a few key macro drivers, like the U.S. 10-Year rate. At current levels of the 10-Year, CHF/JPY should be trading around Y136. Our fair value framework reveals a near 4% risk premium, underscoring how the cross has also overshot broad global themes.”