Long NZDCHF, short CHFJPY, long term opportunity

T

tsfx

Hey,

Thought i'd give you a long term trade idea here. Since JPY has dropped like a rock while CHF has skyrocketed like mad, i would consider this as one of those "once in a lifetime" opportunities if you are a "set and forget" type a guy (investor) with no (or maybe really low) leverage. The main motivation of this trade is positive carry assuming that eventually carry matters. That's why i chose NZD to break the ice here.

I'm taking this trade.

Currently, the prices are:

NZDCHF: 0.5228
CHFJPY: 167.37

Here's a chart of NZDCHF - CHFJPY (%change)

Cheers.

nzdchf-chfjpy.png
 
So the individual technicals don't matter as much?

Because though NZDCHF might be approaching possible support @ 0.52xxx CHFJPY has no resistance in sight at all.

AND NZ10Y keeps on climbing higher and higher like all the rest.
 
No, the individual charts still matter, i just posted this chart to emphasize the magnitude of the move % wise when you combine the two instruments.

CHFJPY is interesting actually. It has the same size swing now on weekly chart than previously which is also the highest swing found. Those measures are important technicals in the FX market. Chart attached.

NZDCHF on the other hand does not have anything meaningful right now. That 0.52xx support is very fresh and might not play a role at all. What speaks in favour of this pair is the positive carry.

CHF is now spiking (causing volatility) at tops/bottoms so it seems something is happening. TIme will tell.

The downside of this strategy is that it could very well begin to stall and just be flat for months.

chfjpy.png
 
SunTrader said:
Myself I'd wait a bit to see if NZ10Y trajectory changes any time soon:-

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Developed world bonds trade pretty much the same direction so i myself am not getting any clues from that. Should global bonds reverse, it will be good for JPY longs, hence the chfjpy short. Personally, im not seeing too much appreciation in bonds within the next few years. Could just start to form a (wide) range.

PS. That short term bounce i expected (30-50pts)didnt happen and i closed the trade for a -5pt loss. CHF is defying stats pretty strongly at the moment.
 
tsfx said:
Developed world bonds trade pretty much the same direction so i myself am not getting any clues from that. Should global bonds reverse, it will be good for JPY longs, hence the chfjpy short. Personally, im not seeing too much appreciation in bonds within the next few years. Could just start to form a (wide) range.

PS. That short term bounce i expected (30-50pts)didnt happen and i closed the trade for a -5pt loss. CHF is defying stats pretty strongly at the moment.
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If you got 40 minutes of your Saturday to spare, if you haven't seen this already, pretty interesting take on things:-

Grants 40th Anniversary: "Rates Can Never Rise" (Redux) 10-3-23

DoubleLine CEO Jeffrey Gundlach, speaking Oct. 3, 2024, at Grant’s Interest Rate Observer fall investment conference, shares (1:31) his views on why fixed income yields are headed much higher and the implications of the end of a 40-year decline in interest rates. The title of his presentatio…
...more

 
SunTrader said:
If you got 40 minutes of your Saturday to spare, if you haven't seen this already, pretty interesting take on things:-
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Thanks for that and i loved it. But there are several things i also disagree with. The main thing is that the future can not be predicted the way it used to be. We kinda live in a quantum state where two potential stories (which are completely opposite of each other) are present at the same time and the question is which one is picked up by the media first. Who knows how many force majeures are we going to get this decade that can shape the economic and rate environment.

Rates can't go too high because of obvious reasons but they can't go too low either because of the levels of CB's balance sheets. As long as the covid era printed money is in the economy it is difficult to see fast reversal in CPI. So, all things considered we're probably going forward with US 10y rates peaking between 5%-6% and then slowly but surely ticking down to 4% and then finding it's equilibrium between 3%-4% and then it'll all depend on new force majeures again.

We need a wave of defaults (which is a form of balance sheet reduction) or just an overall depreciation of asset prices to support low rates again.

Disclaimer: Now, that's a rational view on things. The reality will be who knows what. It was a complete mystery why Powell didn't start raising rates like in the first quarter of 2021 instead of 2022. SPX traded at 4000 and there were crypto and every other investment frenzy out there and yet he did nothing...Complete mystery.
The same can happen now so why not 6%+ rates? And we simply brand with the statement "The inflation is very high" :)
 
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