DY: Nikkei Trades Near 5-year Highs As Yen Continues To Weaken
The CME group offers trading in a Nikkei 225 futures contract that is denominated in U.S. dollars. The following are some of the key contract specs:
OptionsXpress Symbol: NK Contract Size: $5 X Nikkei 225 Index
Tick Size: 5 points = $25.00
Contract Months: March, June, September, December
Settlement: Cash Settled
Trading Hours: 5:00 pm to 4:15 pm Central Time
Fundamentals
The Bank of Japan’s (BOJ) plan to help stimulate the country’s moribund economy has seen some success in the equity markets, as many investors and traders move funds into Japanese stocks, sending the benchmark Nikkei 225 index soaring to 5-year highs. On April 4th, the BOJ announced that it would embark on a massive monetary stimulus program to, hopefully, jump- start an economy that has been in a deflationary spiral for nearly 2 decades. The Japanese equity markets received further positive news this past weekend, as a meeting of G 20 leaders failed to take to task the BOJ’s expansive monetary policies. This gave a green light for forex traders to sell the Yen, sending the currency closer to the widely watched 100 Yen per dollar level. A weaker Yen should help the country’s major exporters become more competitive and hopefully will lead to improved earnings in the coming months. This week will see many Japanese companies report earnings, which will be closely followed by traders hoping to get a read on how the recent weakness in the Yen is starting to affect company profits. The biggest bottleneck seen in the BOJ’s goals of restoring economic growth may come from the country’s private sector and their willingness to invest in their businesses based on the belief that the economy has really turned the corner out of a recessionary environment and is now facing only a short-lived bounce due to the massive stimulus orchestrated by the Central Bank.
Technical Notes
Looking at the daily continuation chart for the Nikkei futures, we notice the market moving up in a near vertical fashion after breaking out to the upside in late November. The 20-day moving average has been a fairly reliable support indicator throughout most of the up-move, with price breaks below this indicator lasting only a couple of sessions before resuming their upward trend. The 14-day RSI is strong, with a current reading of 69.00, though Nikkei bears will note a bearish divergence forming in the RSI, as a new high in prices has failed to generate new momentum highs as well. 14000 is seen as the next resistance lead for the lead month futures, with support found at the April 2nd low of 11870.
