Japan 225

Nikkei futures look like a market where bulls and bears are waging war, all while the price continues to coil up within a symmetrical triangle, waiting for a potential explosive break.

GBP/JPY is coiling up and primed to fire, sitting in a strong uptrend while bumping up against horizontal resistance dating back to when the Bank of Japan initiated a record FX market intervention to support the Japanese yen in April.

The Nikkei has been grinding higher in recent weeks, but with momentum turning lower at resistance and asset managers are increasing longs, perhaps it's ready for a leg or two lower.

USD/JPY upside looks limited in the near-term, hindered by narrowing interest rate differentials and perceived increased risk of Bank of Japan intervention. The stronger yen may add to growing downside momentum in the Nikkei 225, putting two of the strongest market trends in 2024 under threat.

Focusing on whether the Bank of Japan (BOJ) will scrap negative interest rates should be low on the list of priorities for USD/JPY traders to consider right now. It’s not as important as it’s portrayed to be, creating plenty of noise for an event that could pass without generating significant market volatility.

If there was ever a day for Japan’s Nikkei 225 to overcome its demons and take out the record high set in December 1989, few screen better than today. The ducks look to have lined up for bulls. If we can’t set a new peak, it may provide a subtle warning that the market has run too hard, too fast.

Bond yields, especially in the United States given the US dollar’s role as the global reserve currency, are perhaps more important to Japan than many other parts of the world.

Japan has received a raft of bullish economic news today, sending Japanese government bond yields higher while simultaneously placing downward pressure on USD/JPY and the Nikkei 225.

If you believe the Fed is done hiking rates and will be forced to ease policy aggressively next year, it’s hard to be bullish USD/JPY or the Nikkei 225 given the role yield differentials and FX fluctuations have played in underpinning both this year.

Japan’s Nikkei 225 has endured a whirlwind 24 hours, mirroring the USD/JPY in the wake of the Bank of Japan’s (BPJ) October monetary policy meeting. It’s surged more than 1000 points from the lows hit on Tuesday, largely reflecting stiffening tailwinds for Japanese exporter earnings.

USD/JPY and Nikkei 225 are rising in the wake of the Bank of Japan’s (BOJ) latest interest rate decision, reacting to a smaller-than-expected adjustment to the banks yield curve control (YCC) program.

Speculation surrounding the future of the Bank of Japan’s (BoJ) yield curve control program continues to thwart attempts to push USD/JPY higher, combining with the threat of intervention from the BOJ to cap on rallies in the pair.

For USD/JPY and Nikkei 225, what the BOJ chooses to do near-term will likely be felt well into the future.

It’s been a turbulent 24 hours for USD/JPY and Nikkei 225 as traders attempt to digest the impact from the hot “supercore” inflation reading in the US released overnight on Thursday.

Should the BOJ fail to reach escape velocity from ultra-easy monetary policy settings, it will have implications for the Nikkei 225 and USD/JPY as we move towards 2024.

Nikkei 225 sits on a major support, making near-term price action potentially important for its longer-term trajectory.

Inflation rose to an 8-year high (or a 31-year high if we look past tax-hike impacts), yet its unlikely to see the BOJ shift from their ultra-dovish policy this week.