Last week we noted that the Australian ASX 200 has been trapped in a range since early June, fluctuating between resistance around 6,200 and support near 5,800. At the time, we outlined two potential scenarios, either a break out trade or a continuation of the trading range. Evidently, the ASX 200 remains at a crucial crossroad, holding within the band of resistance around the 6,200 level. Therefore, the same trading strategies are applicable at this stage as the Australian equity index awaits its next big move.

ASX 200 PRICE CHART: 4 - HOUR TIME FRAME (MAY 2020 – OCTOBER 2020)

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NIKKEI 225 PRICE FORECAST

Elsewhere, the Japanese Nikkei 225 trades just a few percentage points beneath its pre-covid levels. Despite lackluster economic growth prior to the pandemic, the Nikkei 225 has recovered most of its losses and looks to be on the verge of recapturing prior highs. Thus, continued demand for risk assets might assist the Japanese index in its attempt to break above resistance around 23,820 which may open the door for the Nikkei to attack secondary resistance around 24,125 – where the index was trading before covid struck.

NIKKEI 225 PRICE CHART: 4 – HOUR TIME FRAME (MAY 2020 – OCTOBER 2020)

(Click on image to enlarge)

Critically, the Nikkei 225 has established a series of higher-highs since August, accompanied by a series of higher-lows more recently. Together, the peaks and troughs have etched out a gradual uptrend that has guided the Nikkei to where it is today. Consequently, the longer-term outlook for the Nikkei remains encouraging while shorter-term pullbacks may serve as healthy consolidation.

Suffice it so say, the Nikkei has rebounded surprisingly well and should it maintain its ascending channel, could continue to churn higher in the weeks and months ahead as monetary policy remains accommodative. That being said, I am hesitant to suggest it will outpace the US indices, but in the event of broader risk aversion, it might have less to lose than the white-hot Nasdaq 100 for instance – a theme I discussed in the fourth quarter equity forecast.