JPN225 Drops Back to Correction TerritoryThe benchmark Japanese index experienced a steep decline after the central bank stepped up is tightening efforts at the start of the month, but was able to cover the losses as investors calmed down.
However, the BoJ is likely to raise rates again and along with the Yen’s rebound, JPN225 could face sustained headwinds. The index loses ground this week and falls back to contraction territory, as Nvidia’s slump amidst broader tech fears, spills over to Japan. Key Japanese chip manufacturing equipment companies and major Nikkei constituents like Tokyo Electron and Advantest suffered heavy losses. JPN225 is now exposed to the 38.2% Fibonacci of its recent rebound, which bring back the risk of a near market.
On the other hand the RSI points to oversold conditions, while the stock market’s strength goes beyond monetary policy and weak Yen. Above the 38.2% Fibonacci, JPN225 can push for higher highs (39,204), although sustained advance has a higher degree of difficulty under current conditions.
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