BOJ vs Fed: Fueling a Japan 225 Recovery?After an aggressive selloff that pushed Japan 225 (Nikkei) into oversold territory, the index printed a solid bullish reaction off the 30,500 key zone. This area aligns with prior demand and offers a clean invalidation level for long positioning. With heavy bearish sentiment already priced in, I’m positioning long with TP near the premium zone around 40,000.
The fundamental picture may be stormy, but technically, this is a textbook reversal play, I’m ready to ride it.
Technicals:
• Price reacted from major support around 30,500–30,800 zone, a level that held in the past.
• Daily imbalance filled, creating the perfect spot for a potential rebound.
• Descending channel break on lower timeframes indicates early bullish structure shift.
• Target zone: 39,000–40,000.
• SL: Below recent swing low, respecting tight risk management.
Fundamentals:
• Global Risk-Off Sentiment: Recession fears and tariffs pushed risk assets lower — Nikkei included.
• Tariff-Driven USD Weakness: US tariffs created uncertainty and drove global equity selloffs. However, hopes for a US-Japan trade deal are increasing, favoring the JPY and supporting Japanese equities.
• BOJ-Fed Divergence: BoJ is expected to raise rates due to broadening inflation, while the Fed is seen cutting rates soon. This differential supports capital inflows into Japan.
• Flight to Safety: Japan’s stable economy and improving policy outlook make it attractive as global volatility increases.
The selloff may have been excessive due to panic over macro headlines. However, price structure tells its own story, and it’s hinting at a bullish reversal. With multiple technical and fundamental confluences lining up, this is a well-balanced long opportunity with clear risk parameters.
Note: Please remember to adjust this trade idea according to your individual trading conditions, including position size, broker-specific price variations, and any relevant external factors. Every trader’s situation is unique, so it’s crucial to tailor your approach to your own risk tolerance and market environment.
Japan225index
ShortI opened a short position this morning for the following reasons:
Weekly:
1) The price closed below 38,113 (key support area) with a large bearish engulfing candle.
2) The candle closed below EMA 21.
3) MACD is still in the bull zone, but the lines have crossed and clearly pointing to the downside.
Daily:
1) The price broke below the ascending parallel channel.
2) MACD has been showing negative divergence for a while.
3) The price is clearly below 39,000 which has been working as major support/resistance in the daily chart.
My overall bias for Japan 225 is bearish and I can see the price can move to 33,000. However,
my first trade set up is as below:
Entry: 38,170S/L: 38,965Target 1: 37,145
Risk:Reward: 1:1.35
It would have been better to enter when the 1H candle closed below EMA 21 on Friday but i was asleep. I am hoping 38,300 area works as strong enough resistance to keep the price down.
Short I opened a short position today based on the 4H chart and daily chart price set up.
My reasonings are as follows:
Japan225 has been in the range bound since Sept 2024. The price peaked at 42,420 area and sharply dropped to 30,480 on the 5th August 2024.
The price started to recovered to 39,150 area on the 30th August 2024. Since then, that level is working almost like a magnet and the price has been moving between 37,500 and 40,400 for months and months. However, MACD has been very slowly forming negative divergence. Therefore, although the price is consolidating sideways, my bias for trade is more towards shorting, and I could see a good set up unfolding this morning.
Currently the daily candle is sitting right on the major support/resistance line. But when you look at 4H chart and 1H chart, the price has formed the double top, dropped below the major support/resistance line, rested and is now moving to the downside.
All 4H momentum indicators are in agreement and moving to the downside. (They are still in the bull territory so the downside move might be limited).
1H MACD and RSI have formed clear negative divergence and now entering to the bear zone.
Entry - 39,191
Stop Loss - 39,508
Targtet 1 - 38,820 (the previous week's mid price)
Target 2- 38,550 (Fib 0.786 area in 1H chart)
The price action of Japan225 has been really choppy and messy, so it might not be an ideal asset to trade at the moment. I day trade Japan225 every morning using 1min chart, so I am familiar with this asset, but probably there are easier ones to trade.
I just wanted to share my trade idea.
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Entry 📈 : You can enter a Bull or Bear trade at any point after the breakout.
Buy entry above 39200.0
Sell Entry below 38200.0
Stop Loss 🛑: Using the 2H period, the recent / nearest Pullbacks.
Goal 🎯: Bullish Robbers TP 40300.0 (or) Escape Before the Target
Bearish Robbers TP 37400.0 (or) Escape Before the Target
Fundamental Outlook 📰🗞️
Current Fundamentals:
Japanese Economy: The Japanese economy is expected to grow at a moderate pace, with a forecasted GDP growth rate of 1.2% for 2023.
Monetary Policy: The Bank of Japan (BOJ) has maintained its ultra-loose monetary policy, with a negative interest rate of -0.1% and a commitment to purchase Japanese government bonds (JGBs) to keep the 10-year yield around 0%.
Inflation: Japan's inflation rate has been rising, but it remains below the BOJ's target of 2%. The current inflation rate is around 0.5%.
Trade Tensions: The ongoing trade tensions between the US and China have had a negative impact on the Japanese economy, particularly on the country's export-oriented industries.
Upcoming News:
BOJ Interest Rate Decision: The BOJ is scheduled to announce its interest rate decision on March 18, 2023. The market expects the BOJ to maintain its current monetary policy stance.
Japanese GDP Growth: The Japanese government will release its GDP growth data for Q4 2022 on March 10, 2023. The market expects the economy to have grown at a moderate pace.
US-China Trade Talks: The US and China are scheduled to resume trade talks in March 2023. A positive outcome could boost the Japanese economy and the JP225.
Bullish Factors:
BOJ's Ultra-Loose Monetary Policy: The BOJ's commitment to maintaining its ultra-loose monetary policy could continue to support the Japanese stock market.
Weakening Yen: A weakening yen could boost Japan's export-oriented industries and support the JP225.
Improving Corporate Earnings: Japanese companies have been reporting improving earnings, which could support the JP225.
Bearish Factors:
Global Economic Slowdown: A global economic slowdown could negatively impact the Japanese economy and the JP225.
Trade Tensions: Escalating trade tensions between the US and China could negatively impact the Japanese economy and the JP225.
Rising Inflation: Rising inflation could lead to higher interest rates, which could negatively impact the Japanese stock market.
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Use trailing stop-loss orders to protect your running positions and lock in profits
Please note that this is a general analysis and not personalized investment advice. It's essential to consider your own risk tolerance and market analysis before making any investment decisions.
Keep in mind that these factors can change rapidly, and it's essential to stay up-to-date with market developments and adjust your analysis accordingly.
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Japan 225: Amid Bearish Momentum and Global UncertaintyThe Japan 225 index is currently trading below the FibCloud, signaling a potential downward trend. My target for this short trade is around the 35,500- 36,200price area, where I anticipate significant support based on historical price movements and Fib levels. For now, I’ll let the trade run, while closely monitoring price action near the 40,000 zone. It’s crucial that the price remains below this level for the short trade to remain valid. A recovery back above 40,000 could signal a reversal, and in such a case, I may reassess my strategy.
Technical Overview:
• Partials: 38,000- 37,000area.
• Stop Loss: Monitoring the 40,000 zone as a key level of resistance.
• Key Indicators: The FibCloud provides strong bearish signals, and the declining price action suggests continued selling pressure.
• Risk Management: I’ll adjust the stop-loss level accordingly if the market shows signs of recovery or increased volatility. Taking partials at key support levels to secure profit remains an essential part of this strategy.
Fundamental Overview:
• Asia-Pacific Market Sentiment: As noted in the news, Asia-Pacific markets are mixed with attention on China’s loan prime rate announcement and Japan’s general election at the end of the week. While China’s central bank cut the one- and five-year LPRs by 25 basis points, this has not done enough to boost confidence, especially with property stocks tumbling.
• Japan’s Economic Data: Japan’s exports fell by 1.7% in September compared to the same period last year, signaling a potential slowdown in trade. Additionally, the Nikkei closed marginally lower recently, indicating bearish market conditions.
• Global Outlook: Japan’s market might be impacted further by inflation figures and GDP data expected this week, adding volatility and making the short trade setup timely.
Note: Please remember to adjust this trade idea according to your individual trading conditions, including position size, broker-specific price variations, and any relevant external factors. Every trader’s situation is unique, so it’s crucial to tailor your approach to your own risk tolerance and market environment.