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This article is a follow-up to: Nikkei rises on strong economic growth and positive US signals
The Japanese stock market index, Nikkei share average (Symbol: Nikkei225) climbed close to 3%, setting the stage for its best weekly performance in over four years.
Picture: Nikkei continued to rally on strong US retail sales data, as observed on the VT Markets app.
On the charts, the 4-hour chart for Nikkei 225 displays a notable recovery from the 30380 low in early August, with the index currently trading near 37958.15, just below a key resistance level at 37965.85. The upward momentum has been supported by the moving averages (EMA 24, 24, 72) beginning to trend upward, suggesting bullish sentiment.
The MACD indicator also shows a rising histogram with increasing green bars, indicating strengthening momentum. If the index breaks above the 37965.85 resistance, it could signal a continuation of the bullish trend, potentially targeting the 38148.15 high.
Failure to breach this resistance could lead to consolidation or a pullback towards lower support levels.
The rally was primarily driven by robust US retail sales data, which helped alleviate fears of an impending recession in the world’s largest economy.
The Nikkei rose to 37,800.42 by the midday break, buoyed by strong performances from semiconductor-related shares and a weaker Japanese yen.
The positive momentum in the Japanese stock market can be attributed to the strong US retail sales figures released on Thursday. Retail sales in the U.S. rose by 1% in July, reversing a downwardly revised 0.2% drop in June.
This data was pivotal in soothing investor concerns about a potential recession, as consumer spending is a critical component of economic growth. The data also provided a boost to global markets, including Japan, where investors had been grappling with concerns over the US economy’s health.
The rally in the Nikkei was led by semiconductor-related shares, mirroring gains in the US market where the Philadelphia SE Semiconductor Index finished nearly 5% higher.
Tokyo Electron, a major player in the semiconductor industry, gained 3.8%, while Advantest, another key chip-testing equipment maker, jumped 5.4%. These gains were instrumental in driving the broader Nikkei index higher.
Traders should remain cautious and exercise risk management, as the market recovery is still fragile and heavily dependent on upcoming economic data.
The US nonfarm payrolls report for August will be an important indicator to watch, as it could determine whether the recent sell-off was an overreaction or a justified response to underlying economic concerns.
Additionally, traders should keep an eye on the movements of the Japanese yen, as its stabilisation has been a key factor in the recent market rally.
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