This week, our currency strategists focused on the Bank of Japan monetary policy decision and its potential impact on JPY crosses amid mixed risk sentiment and elevated geopolitical tensions.

Out of the four scenario/price outlook discussions this week, one discussion arguably saw both fundie & technical arguments triggered to become potential candidates for a trade & risk management overlay.

Watchlists are price outlook & strategy discussions supported by both fundamental & technical analysis, a crucial step towards creating a high quality discretionary trade idea before working on a risk & trade management plan.

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Check out our review of that discussion to see what happened!

CHF/JPY: Tuesday – June 16, 2025

CHF/JPY 1-Hour Forex Chart by TradingView

On Monday, our strategists had their sights set on the Bank of Japan monetary policy decision and its potential impact on the Japanese yen.

Based on our Event Guide, expectations were for the BOJ to keep policy rates steady at 0.50%, with markets watching closely for any signals about future tightening amid global trade uncertainties.

With those expectations in mind, here’s what we were thinking:

The “Yen Yield” Scenario:

If the BOJ maintained its hawkish stance or signaled readiness to resume rate hikes once trade uncertainties eased, we anticipated this could boost JPY.

We focused on USD/JPY for potential short strategies if risk sentiment turned negative, particularly given the pair’s position near triangle resistance and building Fed rate cut expectations. In a risk-on environment, AUD/JPY short looked promising given Australia’s recent disappointing employment data and China growth concerns.

The “Yen Yawn” Scenario:

If the BOJ struck a more cautious tone about future tightening or emphasized growth concerns over inflation fighting, we thought this could weigh on JPY.

We eyed GBP/JPY for potential long strategies if risk sentiment stayed positive, especially given the pair’s uptrend and position near key support levels. If risk sentiment leaned negative, CHF/JPY long was our pair of choice, given the franc’s appeal as a U.S. dollar alternative in Europe.

What Actually Happened

The BOJ decision delivered largely as expected but with a mildly dovish tilt:

• Policy rate held steady at 0.5% by unanimous vote as expected
• Bond purchase tapering slowed from April 2026 onwards (200B yen quarterly reduction vs. current 400B yen pace)
• Emphasized “extreme uncertainty” around global trade policies and their impact
• Growth outlook cautious due to trade policy headwinds
• Core inflation running at 3.5% recently, well above the 2% target

Governor Ueda’s press conference maintained data-dependency while acknowledging that trade uncertainties could delay further tightening.

Market Reaction

This outcome fundamentally triggered our JPY bearish scenarios. And with potential U.S. participation in the Israel-Iran conflict weighing on the U.S. dollar amid increased safe-haven demand, CHF/JPY became our focus.

CHF/JPY swung back and forth as the BOJ kept its rates steady but surprised markets by slowing its bond taper. Gov. Ueda and his team also signaled they prefer avoiding unnecessary market volatility while maintaining their gradual normalization path.

Still, some profit-taking and rising Middle East tensions gave the yen a brief edge over the safe haven Swiss franc. Concerns about possible U.S. involvement in the Israel-Iran conflict and fears of the fighting spilling across the region helped boost demand for the yen midweek.

The bearish move in CHF/JPY reversed on Thursday after the Swiss National Bank (SNB) surprised with a rate cut to 0.00%. SNB Chairman Schlegel even said negative rates were still on the table. But since some traders had expected a bigger cut, the franc actually rallied after the 25 bps move.

CHF/JPY found support near 177.00, right around the 50% Fibonacci retracement, then climbed to the 178.00 area before bullish momentum started to fade.

Risk sentiment remained mixed throughout the week, with geopolitical tensions keeping safe-haven flows balanced, but the relative policy divergence between the SNB’s flexibility and BOJ’s caution favored CHF strength. By Friday’s close, CHF/JPY had reached the 178.50 area, marking the weekly highs, despite a slight improvement in risk-taking.

The Verdict

So, how’d we do? Our fundamental analysis anticipated potential JPY weakness on a cautious BOJ stance, which materialized in both the statement and press conference. Our technical analysis accurately identified the key support confluence area near 177.00 where buyers emerged.

If traders entered long positions after the BOJ event when the pair bounced from the Fibonacci/Pivot Point/trend line confluence area, they could have captured a substantial move higher. The setup was particularly effective for those who waited for the pullback to the technical support zone rather than chasing the initial move.

Overall, we think this discussion “highly likely” supported a net positive outcome as both fundamental and technical triggers aligned well. The pair showed strong bullish momentum after finding support at the discussed technical levels and closed the week essentially at the highs, offering multiple entry opportunities for patient traders who waited for the optimal setup at the technical confluence area.