nikkei 225 daily outlook wed 30 mar 2016 still below range top of 17135 1803672016

(Click to enlarge charts)

What happened earlier/yesterday

The Japan 225 (proxy for the Nikkei 225 futures) has continued to trade below the “contracting/symmetrical triangle” range top at 17135 despite the “dovish speech” from Fed chairwoman, Yellen at the Economic Club of New York. She has reiterated that future policy benchmark interest rate hikes will be gradual due to weaker global growth.

Key elements

• The failure to break above the range top at 17135 is also assisted by a stronger JPY as Yellen’s dovish speech lead to a sell-off in USD across the board. Based on intermarket analysis, the Nikkei 225 has an indirect correlation with the USDJPY, for example, a fall in the USDJPY exchange rate will tend to cap potential gains in the Nikkei 225. As highlighted in our latest weekly outlook/strategy (click here to recap), the USDJPY is capped by a range top at 114.30/45 which is likely to put a cap on potential gains at least in the medium-term (multi-weeks).
• The short-term significant support above the “contracting/symmetrical triangle” range bottom of 16570/500 rests at 16750 (the minor swing low area of 24 March 2016 @9pm).
• The hourly (short-term) Stochastic oscillator remains oriented to the downside and still has ample room before reaching its extreme oversold level.

Key levels (1 to 3 days)

Pivot (key resistance): 17135

Supports: 16750 & 16570/500

Next resistance:  17315 (weekly pivot)

Conclusion

As long as the 17135 daily short-term pivotal resistance is not surpassed, the Index is likely to see a decline within the “contracting/symmetrical triangle” range configuration towards the 16750 support with a maximum limit set at the range bottom of 16570/500.

On the other hand, a crack above the 17135 short-term pivotal resistance may negate the bearish tone to see a push up to probe the 17315 weekly (medium-term) pivotal resistance.

Disclaimer

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this email, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs. All queries regarding the contents of this material are to be directed to City Index, a trading name of GAIN Capital Singapore Pte Ltd.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.