The next step up awaits an improvement in the external environment
This week, within a range of 27,000 to 28,000 yen, we consider it an excellent buying opportunity if the price tests the lower end and rebounds, since the near-term downside target is at the 200-day moving average (27,400 yen). We thus anticipated a setup that would probe the lower limit for a rebound.
However, as the currency trend shifted to weaker yen and stronger dollar, export-related stocks were bought and the index temporarily recovered to 28,000 yen.
The Nikkei Average rose 1,655 yen from the low of 26,632 yen on March 16 to the high of 28,287 yen on April 4, but on April 5 it fell 474 yen and on the 6th by 340 yen to 27,427 yen, dropping 814 yen over two days.
Considering that technical indicators were overheated, this pullback can be viewed as a speed adjustment, but given the schedule of upcoming U.S. economic indicators, it cannot be said that the market will continue to advance.
On Monday, April 10, at the start of the week, with the late-week confirmation from the U.S. March employment statistics that labor conditions remained solid, concerns about a slowdown in the U.S. economy receded somewhat, and the index rose to as high as 27,737 yen, up 219 yen, with a close at 27,633 yen, up 115 yen. On Tuesday the 11th, after Bank of Japan Governor Ueda stated at his inaugural press conference that it is appropriate to maintain current monetary policy, the yen weakened by more than 1 yen to the mid-133s per dollar, helping export-related stocks advance. News that Warren Buffett was considering additional investment in Japanese stocks also supported gains, lifting the index to 28,068 yen, up 434 yen intraday, before closing at 27,923 yen, up 289 yen.
Today, Wednesday the 12th, the morning session continued to see a weaker yen and stronger dollar, with buying taking the lead, and the support from Buffett’s hinted additional purchases of Japanese stocks, along with some index futures buying, pushed the gain to 28,114 yen, up 191 yen. The afternoon session remained firm, and the close was at 28,082 yen, up 159 yen.
In the first half of this week, with a weaker yen and Buffett’s hints of additional purchases of Japanese stocks, the index recovered to 28,000 yen, and in the near term there is a tendency to test the 28,287 yen level seen on April 4 (Tuesday). This week features mini-SQ on the 14th (Friday), so some upside could be driven by supply-demand dynamics and futures leadership. However, from here, profit-taking is likely to be more prevalent, and until each U.S. economic indicator is checked one by one, it is hard for the market to move higher. If the market goes higher, it would be in the context of gains in the U.S. Dow Jones and Nasdaq.
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