Nikkei
The Nikkei 225 is down by more than 3.38% today, becoming the worst-performing index in Asia. Other indices like the Hang Seng, Shanghai, and KOSPI are down by 2.16%, 0.78%, and 3% respectively. The index is trading at ¥21,559, providing further evidence that Friday’s rally was a dead cat bounce.
The Nikkei decline as investors waited for the Bank of Japan interest rate decision that will come out tomorrow. According to the Japan Times, the bank is expected to leave its main policy levers unchanged as it assess other measures to support the ailing economy. As such, the bank will likely leave rates unchanged at -0.10% and continue with its large-scale asset purchases. Also, it will accelerate its yield curve control.
The decision will come at a time when the Japanese yen has been gaining against peer currencies, including the dollar. USDJPY pair is trading at 107.13, down by 0.20% from the Friday’s close. On Monday last week, the currency was trading at 109.50.
A strong Japanese yen is usually bad for most companies in the Nikkei 225 because it makes their goods expensive to foreign buyers.
Most companies in the Nikkei 225 index are in the red today. The worst performer is Mitsui Engineering, whose shares declined by more than 10%. It was followed by Chiyoda, Familymart, Advantest, and Tokyu Fudosan whose share prices fell by more than 5%.
On the other hand, there were just seven companies in the Nikkei 225. The best-performer was Idemitsu Kosan, whose shares rose by 1.85%. It was followed by NTT Docomo, Shionogi, Astellas Pharma, and Toyo Seikan.
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On the daily chart, the Nikkei 225 index formed a top at about ¥23,200. And on Thursday, the price moved below the important 78.2% Fibonacci retracement level. It formed a dead cat bounce on Friday, and today, it moved lower sharply and is now slightly above the 61.8% Fibonacci retracement level at ¥21138. This means that bears seem to be in total control. As such, they will attempt to move below this retracement and even below the ¥21,000 level.
On the flip side, a move above ¥22,000 will invalidate this trend. This price is an important psychological level. A move above it will signal that there are still more buyers in the market.