Is the Nikkei Poised for a Breakout?

Nikkei 225 Index Futures (CME: NIY) continue their upward trajectory and have enjoyed a strong start to the week, extending gains for a third consecutive session. The index is up 1.12% week-to-date and a staggering 19.5% year-to-date, reflecting positive investor sentiment. 

Japanese markets witnessed a surge, with the Nikkei 225 climbing by 1.08% to close at 39,765 and the broader Topix Index gaining 0.97% to reach 2,755. Contributing to this rise were technology stocks, buoyed by improved consumer confidence data in Japan, which reached a near five-year high in March. 

Chip-related stocks led the gains, with notable performers including Tokyo Electron and Advantest. The positive sentiment was further supported by a weaker yen, which raised the value of overseas profits for Japanese firms. Notable gainers in the Nikkei included Tokyo Electric Power, Shin-Etsu Chemical, and Rakuten Group. 

Technical Analysis 

The Nikkei 225 Futures (CME: NIY) is currently trading at 39,765, hovering above the 50-SMA (blue line) and 100-SMA (orange line) after a bullish breakout above the 20-SMA (green line). This signals a potential shift in short-term momentum towards the upside. 

The RSI (55.15) has climbed above the significant 50.00 level, indicating a rise in buying pressure. A sustained break above the levels could bring the resistance level at 40,290 into play. A break above the initial resistance, on significant volume, could pave the way towards the multi-decade high of 40,915 price level above.  

However, rejection of the SMA levels could open a path towards the 38,790 support level lower. A successful break below the initial support could trigger a sell-off lower, with the 38,060 price level acting as the next level of significance lower. 


The current market sentiment leans towards cautious optimism. Positive domestic data and a weaker yen are countered by the looming US inflation data, which could trigger a shift in sentiment depending on the outcome. A lower-than-expected inflation print could fuel a risk-on rally, potentially propelling the Nikkei 225 Futures higher. Conversely, a hotter-than-anticipated inflation reading could dampen risk appetite and trigger a sell-off across global markets, potentially dragging the Nikkei 225 Futures lower.  

Sources: TradingView, Trading Economics, MT Newswires, Reuters. 

Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst 

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