CHFJPY recently broke below the neckline of its head and shoulders pattern, indicating that a selloff that’s the same height as the formation is due. However, price has yet to complete its retest of the former support in order to draw more selling pressure.

This broken neckline lines up with the 100 SMA dynamic inflection point, which might add to its strength as a ceiling. The 100 SMA is below the 200 SMA to confirm that the path of least resistance is to the downside or that the downtrend is more likely to resume than to reverse.

Stochastic is also indicating overbought conditions or exhaustion among buyers, so turning lower would mean that sellers are ready to return. RSI is starting to head south, suggesting that bearish momentum is about to pick up.

The chart pattern spans around 400 pips in height, so CHFJPY could stand to drop to the 136.00 level from here.

Economic data from Japan has turned out mostly weaker than expected, with the core machinery orders report printing a sharper 5.6% drop and the preliminary machine tool orders figure slipping from 23.7% to 17.1% year-over-year.

This has led to a selloff for the yen, as the downbeat figures likely reminded traders that the BOJ is unlikely to hike interest rates or reduce quantitative easing anytime soon.

However, a pickup in risk aversion might be enough to support the safe-haven yen, especially with the US CPI coming up. Stronger than expected inflation could prompt Fed tightening expectations, which might keep traders wary of a recession.

In turn, demand for the lower-yielding yen could pick up, as traders seek safer holdings. There are no major reports due from both Switzerland and Japan for the rest of the week, but China’s data releases on Friday might also impact sentiment.