Nikkei boost on weakening yen

Japanese stocks have been edging up since the Jackson Hole Symposium, when the Bank of Japan signalled a ‘lower for longer’ stance and potentially more monetary easing ahead.

Japan data board
Source: Blommberg

Japanese stocks have been edging up since the Jackson Hole Symposium, when the Bank of Japan signalled a ‘lower for longer’ stance and potentially more monetary easing ahead.

The Nikkei 225 looks likely to stay the course with the lack of strong leads until Friday, when we’re due to get a huge round of 14 pieces of Japanese macro data.

So far this week, volumes have been 20% below the daily average, reflecting the relatively quiet sessions across the region which could translate into slightly more choppy sessions ahead.

One key data point to watch out for on Friday is the CPI for July. Stripping out the effects of April’s consumption tax hike, June’s inflation rate was only 1.3% - still some way below the 2% inflation rate target.

A disappointing reading will likely be a positive for USD/JPY and Japanese stocks, especially the exporters as it would accelerate any easing measures.

Another indicator is the industrial production estimates for July, which is expected to improve month-on-month. The market consensus is for a print of a 1% increase, after June dropped to -3.4%. The year-on-year figure is expected to slip to -0.1%, after rising 3.1% last July. Any miss in expectations could also spur the yen to weaken further.

The Nikkei is currently on an uptrend and could test its resistance level of around 15,760 points. More conservative traders could look at a retracement towards the 15,477 level for an entry.

Click to enlarge

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. 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. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.