Nikkei 225 Hits Record High Despite Economic Weakness

By Samir Al Khoury,

Despite the weakness of the Japanese economy, the Nikkei 225 Index continues its upward trend, reaching a record high of 41,769 points. This index outperforms most global stock indices, having risen by about 26% since the beginning of the year until yesterday’s session.

These notable increases in Japanese stocks can be attributed to several factors, the most important of which are:

• An increase in semiconductor-related stocks: For example, “Adventest” shares rose by about 4% in yesterday’s session and are up by about 53% since the beginning of the year until yesterday. Additionally, “Sony Group Corp” shares increased by about 5% in yesterday’s session.

• The weakness of the Japanese yen: Currently, the yen is approximately 161 yen per US dollar, encouraging investors holding foreign currencies to invest in Japanese markets.

• Uncertainty regarding the Bank of Japan’s monetary policy: Interest rates are still close to 0%, supporting Japanese stocks.

Markets are closely watching the interest rate decision from the Bank of Japan, expected on 31st July 2024. The question arises: Will there be a rate hike for the second time this year during this session?

Technical indicators may support the Nikkei 225 index in the next stage for several reasons:

1. Moving Averages: The 20-day moving average exceeds the 50-day average, and the 50-day average exceeds the 200-day average, indicating a regular upward trend.

2. Relative Strength Index (RSI): Currently recording 75 points, it is in the overbought area, indicating upward momentum for the Nikkei 225 index.

3. MACD Indicator: The MACD is above the signal line in the positive area.

4. Directional Movement Index (DMI): The positive movement index (DMI+) is approximately 44 points, compared to the negative movement index (DMI-), which is around 12 points. The significant gap between these two indicators suggests strong buying pressure on the Nikkei 225. Moreover, the ADX trend strength indicator is green, recording about 25 points, indicating strong momentum in this upward trend.

Please note that this analysis is provided for informational purposes only and should not be considered as investment advice.

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