Day one: our Japan 225 trade idea

Potential trade idea – buy the Nikkei on dips into 14,800, with a stop placed a touch below 14,000 and a potential target of 15,800.

It is a big week ahead for Japan, with the BoJ set to hit the wires on Thursday. Last week’s gains for the pair were triggered by a flight back to risk which saw the yen sold off against the riskier currencies. As a result, USD/JPY has remained remarkably resilient and is solidifying its spot above 100.

Traders will be sceptical about shorting the pair ahead of this week’s BoJ meeting. In the first half of December, Japan will compile an economic package to help offset the impact of the planned sales tax hike. As we edge closer to the BoJ meeting and the details of this package, buying the dips in the Japanese equities and USD/JPY is likely to be the preferred strategy.

Friday’s high was at around 100.44 and that’s the level to look out for in the near term. The Nikkei is pointing up 0.9% to 15,302 after managing to breach 15,000 last week. While the 15,000 level is likely to hold, I feel short-term volatility could result in some profit taking early in the week which would then present buying opportunities in the Nikkei.

The 14,800 was essentially the high from recent consolidation and also coincides with the break above a recent downtrend resistance line. As a result, I feel dips into this level could be an ideal buying opportunity. The Nikkei’s high from May was just shy of 16,000 and as a result I will be targeting a potential move to 15,800.

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication.