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Day five: our potential Japan 225 trade

I continue to hold a long Japan 225 bias and feel the risk is we see further upside in this index.

Japan
Source:Bloomberg

Following on from my potential trade idea yesterday, having printed a higher high after breaking above the June 9 high last Thursday, we saw the index subsequently sell-off to test the June 9 high and a wave of buying came into the index. The 20-day moving average is also headed higher and thus as long as price stays above this level we should see the short-term trend high continue.

I would look for a renewed push the top Bollinger band in the short term (see attached chart) and thus feel placing a profit target on my idea at 15,470 (just below the top Bollinger Band) could be prudent.

I am not convinced that today’s Japanese inflation data will have a significant impact on either the Japan 225 index or USD/JPY. We need to remember that while the national CPI (ex-food) print is expected to tick up to 3.4%, two percentage points of this can be attributed to the April sales tax. Thus, if we see a number of 3.2% or less there could be calls from the JPY bears that the BoJ should be more aggressive and thus the Japan 225 index could find buyers. We also get retails sales data 20 minutes later. Will bad news be good news for the Japanese index?

Traders could look to place stops around 15,020.

Japan 225 chart

Click on chart to enlarge.

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