Recent adoptees of a bullish Nikkei stance are facing their first real test with a distinct risk-off tone settling in across the Asian region, seeing the index reverse slightly after hitting fresh 34-year highs on Monday.
By :David Scutt, Market Analyst
- Japan’s Nikkei 225 has pulled back from multi-decade highs today
- Other cyclical assets are struggling across the Asia region
- Geopolitical headlines and higher bond yields may be contributing to the weakness
Recent adoptees of a bullish Nikkei stance are facing their first real test with a distinct risk-off tone settling in across the Asian region, seeing the index reverse slightly after hitting fresh 34-year highs on Monday.
Whether generated by fresh geopolitical headlines involving Iran or doubts about the scale of rate cuts priced in across developed markets, cyclical assets are struggling, including the Nikkei. The US bond curve has sold off upon the resumption of trade, seeing yields on 2, 10 and 30-year debt lift around 6bps, recouping some of the losses from Friday following the weak US PPI report for December. The move comes ahead of a key speech from influential Fed Governor Christopher Waller, a known policy hawk up until recently.
Domestically, there was also an upside surprise for Japanese corporate goods price inflation last month which held steady against expectations for a decline of 0.3%, providing the BOJ a minor victory in its attempts to begin normalising monetary policy.
Nikkei’s upside momentum stalls
The Nikkei 225 is on track to record its two bearish candles on the four-hourly chart for the first time in over a week. With the uptrend in RSI broken and MACD crossing over from above, momentum appears to be building to the downside near-term.
While the price did a bit of work in between, 35400 and 35000 are downside targets for those considering shorts. Below, there’s really nothing until you get back to 34000, other than minor uptrend support dating back to the lows set earlier in the year. Above, the high of 35800 last week may act as resistance, allowing a stop to be placed above for protection.
– Written by David Scutt
Follow David on Twitter @scutty
https://www.forex.com/en-us/news-and-analysis/recent-nikkei-bulls-face-their-first-real-test/
The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.