There is little doubt that the Swiss franc (CHF) has been the major beneficiary of a risk averse market due to economic concerns, political posturing, Euro-zone debt matters etc etc.. - naturally all these points leave little reason to fight trends in currencies that benefit from this uncertainty. However, just like most things in life, trends do not persist forever, but boy are they tough to time. Technical analysis can offer clues, but that alone is often not enough. Positioning can often be the additional tool that allows traders further insight, especially when used in conjunction with technical analysis.

CHF/JPY is one such FX cross that is in a persistent uptrend. Consider the following data on CHF/JPY:

• IMM data for instance, shows a 13,000 plus speculative long positions in the franc versus a relatively small 4,800 contract concentration in the yen which is historically a relatively large disparity.
• Recent data on the Tokyo Financial Exchange which shows Japanese margin traders holding near record short positions in the yen. Such concentrated positions by the retail community more often than not lead to sharp moves higher in the yen as that sector of the financial community is heavily levered which further exacerbates the herd mentality to exit when a trend begins to reverse.

Source: FX Concepts

Technically, the Elliott Wave count points to a possible reversal pattern as seen in the chart below:

CHF/JPY Daily Chart:

Click on image to enlarge!

Given that the 'negative' news regarding all things economic, political and investment are now at a fever pitch, this is the ideal time to begin looking for the market to begin swinging the other way. CHF/JPY seems well positioned to take advantage of a shift in bearish sentiment.

For more from Dave, visit Aspen Trading for more updates.