Nikkei
The Nikkei 225 index had closed for business when Friday’s Non-farm Payrolls (NFP) report hit the markets. However, the Nikkei 225 futures traded higher when traders digested the numbers. Apparently, the disappointment of the lower-than expected employment change was offset by the unemployment rate of 3.5%. The unemployment rate was not just lower than expected, it was the lowest this figure has been in 50 years.
This explains why the NFP did not provide the knockout blow that markets expected, after poor manufacturing and services PMI data from the ISM. The Nikkei 225 futures are now open for trading and start the week in green territory.
An analysis of the jobs numbers shows that despite the shortcomings in the employment change, the job growth rate remains at a level that will permit the job market to expand, thus accommodating new entrants.
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On the Nikkei 225 daily chart, the Thursday Oct 3 daily candle bounced from the June26/July18 lows, located at the 50% Fibonacci retracement level (swing low of August 26 to swing high of September 19).
The cross of the modified Stochastics oscillator in deep oversold territory confirmed this bounce. The green daily candle of Friday shows the bullish response of Nikkei 225 futures traders, especially as the unemployment rate data on the NFP provided a positive surprise.
This bullish sentiment may continue as markets open for the new week, with the initial upside target located at the July 12/July26 highs (23.6% Fibonacci level) of 21672.81. Above this price level, 21847 (July 1 and July 25 highs) consitutes the second upside target.
On the flip side, a return of risk-off sentiment from trade related data could trigger a renewed selloff, which could see price retesting 21053 (50% retracement) as the initial downside target.