In the short term, having updated the year-to-date high yesterday, we are entering a pause phase.
The forecast for this week depends on the U.S. economy, and earnings were focal, but in the end, the first half of the week saw a decline in the yen, with export-related stocks leading the gains and pushing the index higher; on Tuesday the 18th, it updated its year-to-date high from March 9 of 28,623 yen (closing price) to 28,658 yen, up 144 yen.
After hitting an midpoint low of 26,632 yen on March 16, the rule of thumb (anomaly) suggests that Japanese stocks will tend to rise from April to May for the time being, and this year especially with the Hiroshima Summit scheduled in May, a rebound after a pullback was expected.
Last week, the upside faced resistance around the 28,500 yen level, and a case for potentially building a firmer floor on the downside was considered.
However, on Monday, April 17, in the prior weekend's U.S. market, March retail sales fell short of expectations, and concerns about worsening economy led to remarks that prolonged monetary tightening by the Fed would be necessary; the dollar strengthened from 132.15 to 133.86 yen. In response, the Nikkei Stock Average tried to move higher, but the day remained capped; however, on Tuesday the 18th, with the dollar buying up to 134.57 yen, the yen weakness and speculative buying lifted prices, widening the gains to 28,698 yen, up 183 yen, and closing at 28,658 yen, a year-to-date high.
Today, the 19th (Wednesday), technical indicators show signs of overheating (for example, the 52-week change ratio around 120% and the first overheating in two weeks), and with a tendency to realize the year-to-date high and a sense of achievement in the near term, profit-taking selling has become dominant. The range around 28,000 yen is tightening, but currently, corporate earnings in Japan and the U.S. are starting, and with the Bank of Japan's Monetary Policy Meeting next week and the FOMC two weeks later, market participants are cautious and awaiting developments.
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