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Last year around the summer time I've made this prediction about Nikkei 225, read more here: Nikkei 225 Will Revive Yen Bearish Trend?
Since than there have been many new developments in the market and the macro landscape has been reinforced itself as soon as BOJ has gone full tilt expanding their current QE programme, and BOJ has lunched QQE II on October last year. BOJ decided to increase its amount of monetary base from 60-70T yen to 80T yen, expanding their balance sheet even further. It was no surprise that as soon as BOJ has gone public with QQE II, Nikkei 225 has broke heavily to the upside and USD/JPY following suit resuming it's bullish trend.
We're now closer to hit my projected target of 21000(see Figure 1), however taking in consideration the balance sheet expansion and the prospects of further upgrades of QE programme from BOJ if inflation expectation target are not hit, we're headed for a blow up move which can turn into a bubble.
In this regard, if we measure the price range from 2000-2015 and project it to the upside we can hit 30k (see Figure 2)
The monetary policy divergences between FED and BOJ is constructive for further USD/JPY appreciation which in turn will reinforce the Nikkei 225 bullishness. USD/JPY is trading currently near a very big inflection point, a Trend-line that connects the highs starting from 1989. The year 1989 is quite important as it was the year that the Japan bubble burst and the beginning of the two lost decades for Japanese economy. Once the Trend-line is broken it will open the door for a retest of the 1998's high near the 145.00 round number.
Tomorrow will be a key event that can set in motion this scenario as the FED can set the stage for the first rate hike since 2006 and signaling more tightening. I'll be discussion in more details tomorrow FED meating in my next blog post, until then trade safely
Best Regards,
Daytrader21
Since than there have been many new developments in the market and the macro landscape has been reinforced itself as soon as BOJ has gone full tilt expanding their current QE programme, and BOJ has lunched QQE II on October last year. BOJ decided to increase its amount of monetary base from 60-70T yen to 80T yen, expanding their balance sheet even further. It was no surprise that as soon as BOJ has gone public with QQE II, Nikkei 225 has broke heavily to the upside and USD/JPY following suit resuming it's bullish trend.
Figure 1. Nikkei 225 Weekly Chart Than and Now
We're now closer to hit my projected target of 21000(see Figure 1), however taking in consideration the balance sheet expansion and the prospects of further upgrades of QE programme from BOJ if inflation expectation target are not hit, we're headed for a blow up move which can turn into a bubble.
In this regard, if we measure the price range from 2000-2015 and project it to the upside we can hit 30k (see Figure 2)
Figure 2. Nikkei 225 Monthly Chart projections
The monetary policy divergences between FED and BOJ is constructive for further USD/JPY appreciation which in turn will reinforce the Nikkei 225 bullishness. USD/JPY is trading currently near a very big inflection point, a Trend-line that connects the highs starting from 1989. The year 1989 is quite important as it was the year that the Japan bubble burst and the beginning of the two lost decades for Japanese economy. Once the Trend-line is broken it will open the door for a retest of the 1998's high near the 145.00 round number.
Figure 3. USD/JPY Long Term Trend-line
Tomorrow will be a key event that can set in motion this scenario as the FED can set the stage for the first rate hike since 2006 and signaling more tightening. I'll be discussion in more details tomorrow FED meating in my next blog post, until then trade safely
Best Regards,
Daytrader21
