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Nikkei 225 & USD/JPY Price Outlook for the Week Ahead

Nikkei 225 & USD/JPY Price Outlook for the Week Ahead

Peter Hanks, Strategist

Nikkei 225 & USD/JPY Forecast:

Nikkei 225 & USD/JPY Price Outlook for the Week Ahead

The Nikkei 225 edged higher this week despite a rocky start to the month. As a result, the index trades narrowly beneath resistance overhead, an area it has only been able to surpass once since early March. Now with a series of higher lows established, a break above 20,000 and the subsequent swing high at 20,516 may be crucial if the Nikkei 225 is to continue higher in the weeks ahead.

Nikkei 225 Price Chart: 4 – Hour Time Frame (December 2019 – May 2020)

Nikkei 225 price chart

Should bulls fail to pierce the level, an ascending trendline drawn from the April lows may provide assistance, but its proximity to price leaves little room for error. Therefore, price would not need to fall far to test the level which may allow it to give way more easily. If it fails, secondary support may not materialize until the 19,000 level – which has influenced price somewhat in the past – or the subsequent Fibonacci level around 18,675.

USD/JPY Price Chart: 4 – Hour Time Frame (February 2020 – May 2020)

usd/jpy price chart

A sort of inverse scenario has been established for USD/JPY, as the Yen has strengthened in recent weeks, sending the pair lower. Consequently, a similar trendline exists that might provide assistance to the Japanese Yen and marks an area of resistance for USD/JPY. Descending from the April highs, the level has kept a lid on the pair since its inception and recent tests have been turned back. Now, little space exists between the spot price and the line in question which may force a break.

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Since multiple technical barriers exist overhead and the Federal Reserve has expressed a willingness to do whatever it takes to keep the US economy afloat, USD/JPY may continue to fall in the coming days. With this in mind, support beneath is rather sparse with a possible hint of buoyancy at the 106 mark. Below exists another potential area of assistance around 105.40 that may come into view if initial support fails.

USD/JPY Mixed
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 9% 12% 10%
Weekly 6% -16% -8%
What does it mean for price action?
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While the fundamental and technical sides play their parts, IG Client Sentiment Data may also suggest USD/JPY could head lower in the weeks ahead as long interest in the pair continues to climb – despite a recent uptick in short positions. In the interim, follow @PeterHanksFX on Twitter for updates.

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

Contact and follow Peter on Twitter @PeterHanksFX

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