I short CH/JPY based on my strong confidence that the JPY will strengthen further ahead of the BoJ's upcoming meeting on 19th March. Here are some key points to consider:

The BoJ is likely to tighten monetary policy this month, according to press reports, instead of waiting until April.

Initial estimates of wage negotiation results for large companies are scheduled to be released on 15th March.

If the results indicate strong evidence of wage growth for the year ahead, we anticipate the BoJ to start hiking rates this month.

Press reports suggest that the ECB is considering formally ending YCC and adopting a new QQE policy framework, involving committing to continuing JGB purchases totaling around JPYG trillion.

For the JPY to strengthen after the policy announcement, the BoJ needs to convey that it is not just a one-off rate hike.

The elevated level of shorts, reaching the highest levels since 2018, increases the risk of a squeeze that could reinforce upward momentum for the JPY.

On the other hand, there is a risk that the SNB may raise rates later this month, creating a marked policy divergence in the near-term and potentially weakening the CHF further.

SHORT CHFJPY TARGETING 163.00

Mar 12 2024

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