Japan 225 Cash IndexShort
Nikkei 225: Volatility and New BoJ Policies
Japan's Nikkei 225 index posted a volatile week, closing Friday with a slight decline of 0.08%, adding up to a weekly loss of more than 3%. This decline reflects the uncertainty that dominates among investors, who are assessing the risks associated with both global geopolitical tensions and domestic economic policies. Factors such as rising oil prices, driven by conflicts in the Middle East, and expectations about possible adjustments in the Bank of Japan's (BOJ) monetary policy have created a climate of caution in financial markets.
The sensitivity of the Nikkei 225 to these global events is evident, and many investors are awaiting further clarity on the BOJ's decisions. Although the Japanese yen has shown weakness during the week, cautious comments from both Prime Minister Shigeru Ishiba and Finance Minister Ryosei Akazawa suggest that changes in monetary policy should be aligned with the government's broader objectives, such as ending deflation and raising wages.
On the economic front, Prime Minister Ishiba has made a significant shift in his approach from a stance of fiscal austerity to a strategy of economic stimulus. Under his leadership, the Japanese government is preparing a stimulus package aimed at alleviating high household living costs. This package will include subsidies to local governments and direct payments to low-income families, as well as a firm commitment to raise the minimum wage to 1,500 yen per hour. These policies are intended to encourage spending and support economic recovery ahead of the October 27 general election.
The success of these measures will be key not only to revitalizing the economy, but also to restoring confidence in financial markets. The Nikkei 225, as one of the country's leading stock market indicators, will continue to be a crucial barometer of how investors perceive the effectiveness of the government's policies in addressing Japan's economic challenges.
Looking at the chart of Nikkei 225 (Ticker AT: JP225) we can see that the current checkpoint of 38,600 points is located in the area of 61.80% of the last Fibonacci retracement so its current resistance zone is likely to hold at 39,450 points. It shows a constant stability in the last week if we look at the volume indicator and observing the RSI at 55.42% does not really show excessive overbought, so we have to see the effect of the new policies to see if it pierces this mentioned resistance or otherwise plummets again to the support zone of 36,650.
Global Market Commentary
Crude oil prices are on track to post their biggest weekly gain in more than a year, driven by escalating tensions in the Middle East. This rise in oil prices may have direct implications for the Japanese economy, which relies heavily on energy imports.
As for gold, it has shown a slight rise, suggesting that investors are seeking refuge in safe-haven assets amid global uncertainty. This trend may influence risk appetite in Asian markets, including the Nikkei.
USD/JPY has seen weakness in the yen, trading at 146.60 per dollar. Although the yen appreciated slightly in the last trading day, its weekly decline of about 3% raises doubts about the effectiveness of the BOJ's monetary policies in the context of inflationary growth.
Finally, the MSCI Asia-Pacific index excluding Japan fell 0.32%, reflecting a general lack of confidence in Asian markets due to volatility in commodity prices and geopolitical tensions. This combination of factors suggests that the Nikkei 225 and other Asian indices could face additional challenges in the coming weeks.
Ion Jauregui - Analyst ActivTrades
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The information provided does not constitute investment research. The material has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and such should be considered a marketing communication.
All information has been prepared by ActivTrades ("AT"). The information does not contain a record of AT's prices, or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information.
Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. Past performance is not reliable indicator of future performance. AT provides an execution-only service. Consequently, any person acing on the information provided does so at their own risk.
The sensitivity of the Nikkei 225 to these global events is evident, and many investors are awaiting further clarity on the BOJ's decisions. Although the Japanese yen has shown weakness during the week, cautious comments from both Prime Minister Shigeru Ishiba and Finance Minister Ryosei Akazawa suggest that changes in monetary policy should be aligned with the government's broader objectives, such as ending deflation and raising wages.
On the economic front, Prime Minister Ishiba has made a significant shift in his approach from a stance of fiscal austerity to a strategy of economic stimulus. Under his leadership, the Japanese government is preparing a stimulus package aimed at alleviating high household living costs. This package will include subsidies to local governments and direct payments to low-income families, as well as a firm commitment to raise the minimum wage to 1,500 yen per hour. These policies are intended to encourage spending and support economic recovery ahead of the October 27 general election.
The success of these measures will be key not only to revitalizing the economy, but also to restoring confidence in financial markets. The Nikkei 225, as one of the country's leading stock market indicators, will continue to be a crucial barometer of how investors perceive the effectiveness of the government's policies in addressing Japan's economic challenges.
Looking at the chart of Nikkei 225 (Ticker AT: JP225) we can see that the current checkpoint of 38,600 points is located in the area of 61.80% of the last Fibonacci retracement so its current resistance zone is likely to hold at 39,450 points. It shows a constant stability in the last week if we look at the volume indicator and observing the RSI at 55.42% does not really show excessive overbought, so we have to see the effect of the new policies to see if it pierces this mentioned resistance or otherwise plummets again to the support zone of 36,650.
Global Market Commentary
Crude oil prices are on track to post their biggest weekly gain in more than a year, driven by escalating tensions in the Middle East. This rise in oil prices may have direct implications for the Japanese economy, which relies heavily on energy imports.
As for gold, it has shown a slight rise, suggesting that investors are seeking refuge in safe-haven assets amid global uncertainty. This trend may influence risk appetite in Asian markets, including the Nikkei.
USD/JPY has seen weakness in the yen, trading at 146.60 per dollar. Although the yen appreciated slightly in the last trading day, its weekly decline of about 3% raises doubts about the effectiveness of the BOJ's monetary policies in the context of inflationary growth.
Finally, the MSCI Asia-Pacific index excluding Japan fell 0.32%, reflecting a general lack of confidence in Asian markets due to volatility in commodity prices and geopolitical tensions. This combination of factors suggests that the Nikkei 225 and other Asian indices could face additional challenges in the coming weeks.
Ion Jauregui - Analyst ActivTrades
*******************************************************************************************
The information provided does not constitute investment research. The material has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and such should be considered a marketing communication.
All information has been prepared by ActivTrades ("AT"). The information does not contain a record of AT's prices, or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information.
Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. Past performance is not reliable indicator of future performance. AT provides an execution-only service. Consequently, any person acing on the information provided does so at their own risk.
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