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Hugo in HTO Trading,

Nikkei 225: Pauses after strong losses

Last week, core consumer prices in the world’s third largest economy, Japan, fell on an annual basis for the first time in over two years in August. The core consumer price index (CPI), which includes oil but not fresh food prices, declined 0.1% from a year ago – the first drop since April 2013.

Even with this aggressive pace of asset buying by the Japanese Central Bank, it is still nowhere near its 2% inflation target and the CPI data continues to show a weak acceleration, which suggests that the Japanese central bank may need to do more.

The Index fell 5.72% since the start of the month and rose 1.5% year to date, plus is in a distribution phase since late August. The Nikkei 225 went back and forward last week without any clear direction and closed in the red near the open of the week. The Stochastic is showing an oversold market setting higher lows and price is making lower lows, signs that the downside may begin to get exhausted.

Expecting an upward move to weekly key level at 19,155 on a break above a weekly support at 18,200 (scenario 1) or a break below the weekly support at 17,450 could push the Index down to other weekly support at 16,150 (scenario 2).

Jp225 is a CFD written over Nikkei 225 futures.