Nikkei 225 Forecast for the Week Ahead

Nikkei 225 Price Outlook:

• Stocks moved off their lows this week as various governments offer stimulus packages to combat the economic drag of coronavirus
• As a result, the Nikkei 225 has retaken several important technical levels as bulls aim higher
• Still, volatility and uncertainty remain elevated which leaves the Nikkei vulnerable to reversals

Nikkei 225 Forecast for the Week Ahead

Stocks have enjoyed a significant recovery this week as governments look to inject their respective economies with stimulus to assist workers and businesses alike. As a result, the Dow Jones, Nasdaq 100 and S&P 500 have pressed higher, so too has the DAX 30. Not to be outdone, the Nikkei 225 has reclaimed several technical levels of note as it climbs alongside its sister indices. Consequently, bulls may look to continue the rebound rally but resistance looms overhead.

Nikkei 225 Price Chart: Daily Time Frame (January 2015 – March 2020)

To that end, an early barrier to a continuation higher may reside around the Fibonacci level at 20,365 which has given rise to price indecision in the past. While the zone is unlikely to make or break a stock rally on its own, its influence over price should not be ignored as it may present an attractive opportunity to reduce or increase exposure – depending on your directional bias.

If bulls can retake the level confidently, subsequent resistance may come into play around the 200-day simple moving average but risks to the rally loom large and volatility remains a lingering threat.

USD/JPY Targets February High Alongside Staggering Dow Jones Rally

In the event coronavirus fears spark another bout of investor panic, risk appetite may vanish and send stocks plummeting once again. Should the Nikkei fall prey to such price action, early areas to watch exist at the 19,040, 18,220 and 16,105 levels – each of which coincides with a prior swing low. Together, they will look to buoy price and ward off a deeper retracement beneath the low tagged last week at 15,337.

Since forecasting directional moves remains exceedingly difficult, traders can look to utilize the various technical levels as areas to reduce or increase exposure in accordance with their underlying bias. That being said, I am hesitant to suggest stocks will continue this parabolic recovery, a topic I discuss at length in my weekly stock market webinar. In the meantime, follow @PeterHanksFX on Twitter for updates.

--Written by Peter Hanks, Junior Analyst for DailyFX.com

Contact and follow Peter on Twitter @PeterHanksFX