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    Nikkei Rises as Chip Stocks Lift Market

    January 31, 2025

    Key Points:

    • Nikkei 225 closed at 39,571.15, reaching an intraday high of 39,694.15.
    • Gains were capped by yen strength, which pressured export-driven sectors.

    The Nikkei 225 rose 0.55% to close at 39,571.15, rebounding from its session low of 39,446.15 but failing to sustain above 39,700 resistance. The index followed Wall Street’s tech-driven gains, with semiconductor stocks leading the advance.

    However, traders showed caution, as the yen’s continued appreciation dampened enthusiasm for exporters, and concerns about U.S. trade policies kept risk appetite subdued.

    Yen Strength Pressures Market Momentum

    The yen extended its rally, marking its best January performance since 2018, amid speculation that the Bank of Japan may continue its tightening cycle.

    A stronger yen reduces the value of overseas profits when repatriated, creating headwinds for export-heavy stocks, including automobiles and electronics. As a result, the Nikkei’s gains remained contained below key resistance levels.

    Technical Analysis

    The Nikkei 225 closed at 39,571.15, gaining 0.55%, with price action consolidating near resistance at 39,701.15. The short-term moving averages (5,10,30-period) indicate bullish momentum, while the MACD remains positive but is flattening, suggesting a possible slowdown.

    Picture: Nikkei closed at 39,571.15, rebounding from its session low of 39,446.15, as seen on the VT Markets app.

    Key support lies at 39,118.15, and a break below this level could see further downside towards 38,900 – 39,000. On the upside, a breakout above 39,701 could pave the way for a test of 40,000, a major psychological barrier.

    Volatility Likely to Persist

    Despite the daily gain, the Nikkei’s weekly trend remains uncertain, with yen appreciation and external risks capping upside potential.

    Market participants remain cautious, favouring stocks with resilient earnings, while currency movements and external economic conditions will continue to shape near-term Nikkei price action.

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