The Nikkei 225 experienced a sharp decline on Wednesday, falling 0.80% to close at 38,412.15, as trader caution grew following remarks by BOJ Deputy Governor Ryozo Himino. His comments suggested that strong wage growth and inflation above the BOJ’s 2% target could justify a rate hike, unsettling sentiment.
Export-heavy sectors such as automakers and electronics manufacturers faced headwinds due to concerns over yen appreciation, which could erode profit margins.
Manufacturing sectors, particularly steel and chemicals, saw some gains driven by improved sentiment according to the Reuters Tankan poll.
However, the broader index remained under pressure. Financial stocks traded flat as the potential benefits of higher interest margins were counterbalanced by concerns over weaker loan demand.
Uncertainty over U.S. fiscal policies under President-elect Donald Trump further added to the cautious tone. Traders were hesitant to take decisive positions ahead of his inaugural address, which is expected to offer more clarity on global trade relations and fiscal strategies.
Picture: Nikkei 225 dips 0.80%, consolidating near 38,412 as bearish momentum builds, as seen on the VT Markets app.
From a technical standpoint, the Nikkei 225 appears to be in a consolidation phase. The index tested key support at 38,300, which held firm during intraday trading, but resistance at 38,600 remains untested. Breaking above this resistance would be necessary to reignite bullish momentum, while a breach of support could trigger further declines.
The MACD histogram suggests that bearish momentum is waning, with a flattening pattern pointing to reduced selling pressure. Moving averages for 5, 10, and 30 periods are converging, reflecting market indecision and highlighting the cautious sentiment among traders.
The Nikkei 225 is likely to remain under pressure in the short term, with the BOJ’s potential policy changes and global factors weighing on sentiment.
Market participants will focus on next week’s BOJ board meeting for clues on monetary policy adjustments, while the yen’s movements and U.S. fiscal policy developments will also influence market direction. Expect tight trading ranges as the index navigates these uncertainties.
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