- The Nikkei 225 rallied rather significantly during the course of the trading session on Friday, slamming into the 39,500 yen level, an area that has been important multiple times.
- This is an area that I think a lot of people would be paying attention to, extending perhaps to the 40,000 yen level.
- This is a large, round, psychologically important number that will attract a lot of interest, and of course options trades.
The market rallying, of course, is partly in fact to the idea that the Japanese yen has shrank during the day, which makes sense, as the Bank of Japan has recently admitted that they cannot raise interest rates. And at the same time, the US dollar has gained due to the idea that jobs numbers came out hotter than anticipated. Therefore, the market will be paying close attention to whether or not the Fed can truly cut rates, at least at the rate of momentum that the market thought.
Top Forex Brokers
The interest rate differential continues to favor the US dollar, and therefore it keeps the Japanese yen depressed. The knock-on effect to this, of course, is that Japanese exports become cheap, and some of their biggest customers, the Americans, the Europeans, et cetera, all can buy Japanese goods hand over fist and therefore the export heavy Nikkei 225 continues to seek gains. After all, if your goods can be bought by most countries, it makes sense that companies such as Sony, Mitsubishi, and Toyota will benefit.
As Long as We Stay Soft in the Yen
As long as the yen doesn't start strengthening quite drastically, I do think that the Nikkei 225 will eventually break above the 40,000 yen level, opening up a path to the 41,550 yen level. Short-term pullbacks at this point in time should continue to be buying opportunities, especially near the 50 Day EMA. This is a situation where the technical traders will more likely than not be interested in getting long again.
Ready to trade our Forex daily analysis and predictions? Here are the best Asian brokers to choose from.