The Nikkei gets hammered, again

The Nikkei 225 started the day well, with the index rising during the morning session, before the sellers pilled-on thick and fast after lunch. A risk-off tone in the market is being fuelled by a credit squeeze in China (see: China to fine tune policy). There are some short-term negative implications of the squeeze, as evidenced by the sell-off in China’s equity markets, but it should help to cool off-balance sheet credit expansion in China. While the Nikkei is suffering from the risk-off environment, safe haven flows are pushing the yen higher.

This drive towards the yen, combined with the global risk-off sentiment, is bad news for the Nikkei. The Nikkei 255 is currently down around 1.60% for the day, which brings the monthly total to -12%. Also, a high percentage of retail investors in Japan can make for a very volatile index (according to Bloomberg Japanese individuals account for around 40% of all volume on the Nikkei).

From a technical perspective, the Nikkei 255 was rejected around the bottom of its daily Ichimoku cloud, yet it’s finding some support around its 100day SMA (see chart). A break through the bottom of its recent trading channel (see chart) may be a bearish development.

Source: Forex.com

25.06.2013