- The Nikkei 225 had a slightly positive session during the trading day on Thursday, testing the 200-day EMA, but it did shy away from it.
- Over the last couple of days, we have seen Japanese stocks get absolutely hammered as the Japanese yen strengthened.
- Remember, the Nikkei 225 is full of a lot of export companies, so if Japanese products become more expensive around the world; the idea is they sell less.
Furthermore, there are a lot of concerns about global growth and if that starts to shrink, with Japan being so heavily invested and reliant on exports, that's not a good thing for their economy as well. The Bank of Japan has recently raised interest rates and that of course has caused a bit of chaos, but the question now is whether or not they can continue to raise rates.
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I Doubt the BoJ Can Do Much More
I don't think they can, mainly because of the massive amounts of debt. After all, most people talk about the US debts being too big and how we can't carry the interest payments on it. But the Japanese make the Americans look like preschoolers. So keep that in mind, and Japan might be a harbinger of what happens in other places. But for quite some time now, the expression has been, Japan is a bug looking for a windshield, we may be watching the bug find the windshield finally.
Interest rates of course will have a major influence, but in the short term, I'd be watching the 200 day EMA because if we can break above there, we might get a bit of a bounce. If we break down below the lows of the trading session on Thursday, that could be a very negative turn of events. This is an index that's worth watching because if it starts falling apart and melting down, that means it's going to be a risk off in most places.
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