Central Bank Moves Drive High-Reward CHF/JPY and EUR/SEK Bets

Bank of America has recently detailed its forex market strategy, focusing on the CHF/JPY and EUR/SEK currency pairs, offering traders new opportunities amid evolving macroeconomic conditions. The bank’s strategies are informed by broader market trends, central bank policy signals, and technical indicators, with an emphasis on capitalizing on short-term volatility and directional moves.

According to the September 2025 Monthly Foreign Exchange Outlook from MUFG Research, the EUR/SEK pair is expected to continue strengthening as the European Central Bank (ECB) maintains its dovish stance, while the Riksbank remains cautious about tightening policy. The outlook suggests a target range of 9.4870 to 9.2500 for the EUR/SEK pair by the end of Q4 2025, supported by the ECB's anticipated monetary easing and the Swedish central bank’s limited policy response. The report highlights that the euro’s resilience against the dollar, driven by weaker U.S. inflation and the prospect of Fed rate cuts, is a key driver for the pair’s potential upward trajectory. Additionally, the euro’s outperformance against the U.S. dollar over the summer has reinforced confidence in its strength relative to other major currencies.

For the CHF/JPY pair, MUFG Research forecasts a range-bound outlook through Q4 2025, with a projected range of 147.65 to 146.00. The analysis underscores the Bank of Japan’s (BoJ) potential to ease monetary policy further, which could lead to a strengthening yen and a corresponding decline in the pair’s value. The BoJ’s recent communication at the Jackson Hole symposium signaled a more hawkish bias, with officials hinting at a possible rate hike in October 2025. This could mark a shift in the BoJ’s long-standing accommodative stance and contribute to yen strength. Meanwhile, the Swiss National Bank (SNB) has maintained its dovish stance, leaving the Swiss franc vulnerable to downward pressure if the Fed continues to cut rates.

Bank of America’s analysis aligns with these projections, noting the CHF/JPY pair as a high-risk, high-reward trade. The bank emphasizes the pair’s volatility, particularly as the BoJ approaches a potential policy shift, and suggests that traders should monitor the BoJ’s October meeting closely for directional cues. The report also highlights the yen’s strength in August, which was bolstered by improved global growth expectations and a more hawkish BoJ narrative. This trend is expected to continue into the fourth quarter, supported by tighter monetary policy and a more normalizing yield curve in Japan.

Technical indicators for CHF/JPY also suggest a potential bearish bias. The pair has shown resistance at the 147.65 level and has been testing support near 146.00. If the BoJ follows through on its hawkish signals, this support could be reinforced, leading to further downward movement in the pair. Conversely, a dovish surprise from the BoJ could see the pair rally toward the 149.20 level. Bank of America’s strategy for CHF/JPY involves a short bias with a 29.1:1 risk-reward profile, targeting an 8.1% downside with minimal risk exposure.

For EUR/SEK, the bank’s approach is more balanced, with a focus on range trading and breakout opportunities. The pair’s current positioning suggests a potential breakout above 9.4870, which could signal a more aggressive bull case for the euro against the Swedish krona. This scenario is supported by the ECB’s expected rate cuts and the Riksbank’s cautious stance. The report also notes that the euro’s performance against the dollar has been a key factor in its strength against other currencies, including the SEK, and that continued divergence in monetary policy between the ECB and other central banks could drive further gains.

In both cases, Bank of America and MUFG Research highlight the importance of central bank policy and macroeconomic data in shaping short-term and mid-term outlooks. The Fed’s ongoing rate-cut cycle, the ECB’s dovish stance, and the BoJ’s potential normalization are all critical factors for traders to consider. Additionally, geopolitical risks, such as the ongoing uncertainty surrounding Fed independence and U.S. trade policy, could introduce further volatility into the forex markets.

As these developments unfold, traders are advised to remain nimble and to closely monitor key central bank decisions and economic data releases. The upcoming FOMC meeting in September, as well as the ECB and BoJ meetings in October, will be pivotal in determining the direction of the CHF/JPY and EUR/SEK pairs. Given the current macroeconomic environment and policy divergences, these currency pairs offer compelling opportunities for both directional and volatility-based trading strategies.

Source: [1] Monthly Foreign Exchange Outlook – September 2025 (https://www.mufgresearch.com/fx/monthly-foreign-exchange-outlook-september-2025/)