Nikkei 225 Correction Stopped As Wall Street Hits Records

Summary:

Nikkei 225 managed to end higher the session following Wall Street indices as Nasdaq and S&P 500 made fresh record highs. Investors sentiment boosted by

Nikkei 225 managed to end higher the session following Wall Street indices as Nasdaq and S&P 500 made fresh record highs. Investors sentiment boosted by better than expected earnings reports from U.S. retailers and stronger housing data that showed a strong rebound in the housebuilding sector. Optimism on a new stimulus package in the U.S. and more liquidity in the markets supports the risky assets.

In Japan, the economic data continues to disappoint. Japan Machinery Orders came in at -7.6%, well below the forecast of 2% in June. Japan Machinery Orders annualized reported at -22.5%, also below the estimates of -17.6% in June.
Japanese Exports dropped -19.2% topping the forecasts of -21% in July, but still a big disappointment as the global economy continues to struggle with the coronavirus outbreak. The Japan Imports came in at -22.3% slightly better than the estimates of -22.8% in July.
Merchandise Trade Balance Total registered in at ¥11.6B, beating the expectations of ¥-77.6B.

The Japanese economy is still under pressure, and the economic data point to a slow recovery. The previous week, Japan Gross Domestic Product (GDP) showed the biggest contraction in the record as the economy shrank by -7.8%, in the second quarter. The economy shrank by 27.8% from the previous year.

Nikkei 225 Daily Technical Analysis

Nikkei 225 halted the correction from the six-month highs and ended 0.26% higher at 23,110. Investors look indecisive at the six-month highs and want to see some clear signs of improvement in the economy. The technical momentum is positive as long as the index stays above 22,500.

Nikkei 225 minor resistance stands at 23,149 the daily high. Next hurdle is at 23,230 the top from August 17. A break above might challenge the six-month highs at 23,340.

On the flip side, support is at 22,953 today’s low. Below 22,953 bears would target 22,674. The bullish momentum will be cancelled if Nikkei 225 breaks below the 50-day moving average at 22,573.