After the huge rally of recent weeks, contracts on the Nikkei (JAP225) have re-entered a correction and are losing almost 1.5% today. The mood in Asian markets remains quite mixed, with Chinese index contracts also losing.
- Last week the Nikkei reached 33-year highs and gained 10 days in a row so the correction should not be surprising. Takai Tokyo Research believes that the reason for today's correction is the lack of bullish activity by institutional investors from the US, where the stock market is closed today due to a holiday. However Takai analysts expect, that increases may return as Wall Street trading resumes;
- The index is supported by the long-weakening Japanese yen, with the USDJPY approaching a 7-month low as the Bank of Japan maintains its previous dovish policy. However, Tachibana Securities points to a possible hawkish move by the BoJ in the near future if the yen records further massive weakening - analysts estimate that the Japanese banking sector could benefit from the decision - this was the best performing of all 33 segments today;
- In the Asian session, shares of Japanese semiconductor manufacturers lost the most heavily. Screen Holdings and Advantest, among others, which also has considerable exposure to China. After a 20% monthly rally, Toyota Motor shares also saw a correction.
Looking at JAP225 contracts, on the M15 interval, we see that the price drop below the SMA200 and SMA100 is not unusual (gray zones) - the correction was something quite normal in the recent rally. However, the key may be the fact that despite the recently defended momentum, the index has returned to declines faster than usual. An important level could be 33,150 points - if the price falls below this level we could see a pullback towards 32,600 points - the local peaks from early June. Source: xStation5
