Nikkei 225 Risks Dropping to 28,500 as Treasury Yields Rise

Summary:

The Nikkei 225 index is under intense pressure as the US Treasuries yields keep rising. We look at the rising possobility that the index could drop to 28,500

The Nikkei 225 index has fallen for the past three consecutive days. Today, it declined by more than 3.8% as the Japanese yen rose against the US dollar. The index is trading at 29,015 yen, which is 5.5% below the 31-year high of 30,727 yen.

Nikkei news: Japan stocks are falling after the relatively mixed economic data from the country. Earlier today, data from the country’s statistics bureau revealed that housing starts declined by 3.1% in January after falling by 9.1% in the previous month.

Further data showed that the country’s retail sales dropped by 2.4% in January while industrial production rose by 4.2%. In Tokyo, the headline consumer price index declined by 0.3%. In response, the Japanese yen has risen sharply against the US dollar. A strong yen tends to have a negative impact on the Nikkei 225.

Still, the most important reason for the performance of the Nikkei is the rising Treasury yields around the world. This increase has pushed many investors to dump stocks. In fact, in the United States, the Dow Jones and S&P 500 futures have dropped by more than 0.25% while in Asia, the Hang Seng and Shanghai have dropped by more than 2%.

Nikkei 225 technical outlook

The Nikkei 225 index has been in an overall upward trend in the past few months. In fact, it is slightly below the highest it has been in more than 31 years. On the four-hour chart, the price has retreated slightly this week and is at the highest level on January 14 and 15.

The index has moved below the short and long-term moving averages, which is a sign that the strong rally is fading. At the current level, the price is along the ascending trendline that connects the lowest level in November and in February.

Therefore, while the Nikkei could drop further, bears need to move below this trendline first. Any drop below this support will see bears target the next support at 28,500.