The Nikkei 225 edged higher by 0.76% on Friday, closing at 37,698.65, after recovering from an intraday low of 37,297.65. The rebound was supported by short covering in index futures ahead of the June 13 SQ (special quotation) fixing, a key settlement event for options and futures contracts.

Foreign traders were seen unwinding short positions, contributing to upward momentum in the cash index. Analysts noted that the futures activity provided a technical lift, following a week of volatile trading.

A weaker yen added to the market’s positive tone. The USDJPY pair slipped to 143.88, improving export sentiment particularly in key sectors such as automobiles and technology, which benefit from a depreciating domestic currency.

Technical Analysis

The Nikkei 225 saw a strong bounce from the 37,297 support level, surging over 400 points to test an intraday high of 37,748. A bullish crossover on the MACD, accompanied by a rising histogram, confirmed upward momentum through the Tokyo session.

The 5- and 10-period moving averages have crossed above the 30-period moving average, reinforcing a short-term bullish setup. However, price action is now consolidating below the 37,705 resistance, with MACD lines starting to flatten, indicating a potential loss of steam.

Immediate support is seen at 37,600, followed by 37,480. A break above 37,750 could open the path toward 37,800–37,820 in the near term.

Despite Friday’s gains, the index remains on track for a 1% weekly decline, its third consecutive weekly loss. Still, the shift in short-term sentiment, aided by futures flows and technical signals, points to the emergence of dip-buying interest ahead of the SQ fixing.

Market participants will continue to monitor movements in the yen, trading volumes in futures, and any unexpected statements from the Bank of Japan. With diverging trends between foreign positioning and domestic flows, the Nikkei could remain volatile through next Thursday’s expiry.

If the yen weakens further and resistance at 37,800 is cleared, the index may regain momentum toward the 38,000 mark. However, a reversal in currency trends or futures sentiment could push the index back below 37,300.

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