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.

The Japan GDP numbers are in and according to the Cabinet Office, Japan's economy grew by an annualised real 2.9% in Q2, which was revised down from an initial report of 3.1% due to lower-than-expected private consumption and capital spending within the country.

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.

Japan’s Nikkei 225 and USD/JPY have been whipsawed following the BOJ January interest rate decision with policymakers providing few clues as to whether they’re likely to lift interest rates out of negative territory for the first time in nearly a decade later in the year.

USD/JPY has surged to fresh one-month highs, aided by a lift in US bond yields which widened interest rate differentials with Japan. Given the risk-off tone seen across broader markets, it’s clear the yen is no longer the safe haven play it once was.