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Related Market Activities
Related market activities include Germany’s increased tax revenues affecting EUR/GBP and GBP/JPY impacted by Japan’s political scene. AUD/JPY stays above 98.00 as Takaichi wins a majority. Gold prices fall in various locations under current market conditions.
The Nikkei is in a powerful bullish trend, having just pulled back from an all-time high before resuming its climb. This upward momentum is identified as a new wave of buying that should carry the index higher in the near term. We see the current structure as a classic setup for continued gains.
For derivative traders, the clear strategy is to buy on any dips, using pullbacks as entry points to join the trend. The key level to watch is 45,344; as long as the Nikkei futures remain above this price, the bullish outlook is secure. Using call options or bull call spreads can be an effective way to play this expected upside.
Persistent Weakness Of The Yen
This rally is heavily supported by the persistent weakness of the Japanese Yen, a trend we’ve observed since the Bank of Japan maintained its ultra-loose monetary policy throughout 2024. The USD/JPY exchange rate has now surpassed 165, a multi-decade high that significantly inflates the overseas profits of Japan’s major exporters. This policy divergence from other major central banks continues to fuel the Nikkei’s ascent.
Underlying fundamentals confirm this positive outlook, with corporate profits for Nikkei 225 companies forecast to grow by over 10% this fiscal year. We’ve also noted that foreign investment into Japanese stocks has exceeded ¥5 trillion year-to-date, showing strong international confidence in the market. This reminds us of the initial surge in foreign buying we saw back in late 2023 that kicked off the last major leg up.
The recent election of Sanae Takaichi as Prime Minister has also been digested by the market as a positive, removing political uncertainty. Her administration is widely expected to support policies favorable to the stock market and continued monetary easing. This stable political environment adds another layer of support for maintaining a long position in the Nikkei.
