Short-term Technical Outlook (Wed, 16 Mar 2017)
(Click to enlarge chart)
What happened earlier/yesterday
The Japan 225 Index (proxy for the Nikkei 225 futures) had continued to decline since the start of the week right below predefined 19700/735 medium-term. Click here for a recap on our latest weekly technical outlook report.
In today’s early Asian session (16 Mar), the Index continued to slide and it almost hit the first medium-term downside target/support of 19400 (printed a low of 19424) , aided by weakness in the USD/JPY after a squeeze in late USD longs triggered by a less hawkish tone in the Fed FOMC’s monetary policy statement.
Key technical elements
- Despite today’s rebound above the 19400 intermediate support, the Index is still below the 19600/640 intermediate resistance defined by the congestion area of 13 March minor low to 15 March 2017 high and the 61.8%/76.4% Fibonacci retracement of the recent decline from 14 March 2017 high to this morning current intraday low of 19424.
- The next significant short-term support rests at 19280 which is defined by the minor swing low area of 09 March 2017 and close to the 61.8% Fibonacci retracement of the up move from 27 February 2017 low of 18993 to this week current high of 19703.
- The hourly Stochastic oscillator has reached an extreme overbought level which suggests that the current rebound seen in the Index is coming close to an inflection level for a potential bearish reversal as short-term upside momentum in price action is overstretched.
- Based on intermarket analysis, the short-term USD/JPY bearish trend is still intact with key short-term pivotal resistance at 114.40/50 for a potential push down towards the medium-term range support of 111.60. Therefore, further expected near-term weakness in USD/JPY is likely to support a further potential decline in the Nikkei 225
Key levels (1 to 3 days)
Intermediate resistance: 19600/640
Pivot (key resistance): 19700/735 (medium-term)
Supports: 19400 & 19280
Next resistance: 19860/20000 (key long-term resistance)
As long as the 19700/735 pivotal resistance is not surpassed, the Index is likely to shape another potential downleg towards 19400 before targeting the next support at 19280.
However, a break above 19735 may invalidate the preferred bearish scenario for a squeeze up towards the 19860/20000 key long-term resistance zone.
Charts are from City Index Advantage TraderPro
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