January 25th Morning Brief
Dave Green • 2 min read
In addition to forex and commodities, let's talk about the Nikkei, the Japanese stock market index. Basically, the Nikkei 225 index is the stock exchange of Japan and it is traded as a derivative asset, particularly as a contract for difference (CFD), with a ticker symbol "JPN225".
That was simple, Right?
Okay, now let's talk about how it operates and the fundamentals that move the Nikkei. To learn how the Nikkei 225 operates, let me highlight some points regarding the Japanese economy.
Japan, being an export-oriented economy, has huge export volume in the United States so the Japanese economy is highly influenced by the performance of U.S economy. That's why the Nikkei 225 index moves mostly in total correlation to the U.S stock markets.
Nevertheless, the historical study of charts and fundamentals will confirm that the Nikkei 225 mostly mirrors the performance of the DJIA (Dow Jones Industrial Average), the U.S stock market index. In order to determine the price action on the Nikkie we need to keep an eye on a number of economic releases from the U.S, to name a few; Manufacturing Data, Non-Farm Payrolls Report, US Retail Sales, Consumer Sentiment Reports and the US GDP Report.
So that’s enough about the educational part, now let's have some insights about the fundamentals and technicals impacting the Nikkei today.
In the early Asian session, the Nikkei is trading around 19,008.00, adding +220.01 points and +1.17% after it fell 0.49% to hit a new 1-month low. The bearish trend in the Nikkei was caused by Kansai Electric Power Co. which fell 64.5 points or 4.94% to trade at 1241.0 at the market close. Moreover, the Resona Holdings Inc. plunged 22.6 points or 3.72% to conclude at 585.1. Lastly, the DeNA Co Ltd fell 94.0 points or 3.56% to trade at 2546.0 by the end of the session.
We can see in the chart that the Nikkei has completed 61.8% retracement at 19121, and it’s still holding below this level, whereas the RSI value at 54 is demonstrating the bullishness in the Japanese stock index. Lastly, the EMA’s, both the 20 & 50 periods, are also supporting the bullish bias.
So considering the technical aspects, I would recommend traders keep an eye on a significant trading level of 19125, as below this, the trade sentiment remains bearish with an initial target of 18990 while the breakage is likely to push the market deeper to 18899. Likewise, the buying is recommended only above a major resistance level of 19125, with a target of 19200.
Good Luck, Happy Trading!!