Nikkei Under Pressure

Japanese stocks are seeing firm selling pressure on Thursday following the publishing of the BOJ’s summary of opinions overnight. The summary showed that BOJ policymakers were firmly hawkish at the April meeting, voicing support for a continued program of rate hikes. Indeed, some members saw the risk of a faster-than-expected program of rate-hikes this year. BOJ governor Ueda echoed these sentiments in Japanese parliament on Thursday, telling lawmakers that if FX moves threaten trend inflation, BOJ policy must respond accordingly.

Intervention Risks

On the back of the recent suspected intervention in JPY FX rates last week, traders are highly sensitive to the risk of further intervention going forward. If this starts to be accompanied by a program of continued tightening from the BOJ, this could have a meaningful impact on driving a reversal higher in JPY, leading the Nikkei lower near-term. As such, traders will be closely watching incoming data out of Japan, as well as monitoring BOJ commentary and FX moves. With USD currently pushing higher against JPY once again, risks of fresh intervention are rising which, if seen, should keep Nikkei pressured lower.

Technical Views

Nikkei

The correction lower in the Nikkei has seen the index trading back down inside the bull channel. Price has recently tested the channel highs and failed, now reversing lower once more. While price holds beneath the 38.45 level, focus is on a test of the 37.06 level next. This will be a key pivot for the index with a break lower opening the way for a continuation of the local bear channel towards deeper bear targets. 

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