Nikkei 225 index analysis after the strong Japan GDP data
The Nikkei 225 index drifted upwards slightly after another set of robust economic data from Japan. The index rose slightly to a high of ¥32,350 on Tuesday, a few points above this week’s low of ¥32,038.
Japan economy is doing wellCopy link to section
The most recent economic data from Japan revealed that the country was doing better than expected. The GDP grew by 1.5% in Q2, higher than the median estimate of 0.8%. It had grown by 0.9% in the previous quarter.
The economy expanded by 6.0% on a YoY basis, higher than the expected 3.1%. This growth was mostly because of the rising external demand, which rose by 1.8%. Capital expenditure and private consumption came in at 0.0% and -0.9%.
Private consumption dropped by 0.5% in Q2 as net exports jumped by 1.8%. This growth was helped by the falling Japanese yen. The USD/JPY pair has jumped by more than 14% from the lowest level in January. Tourism also helped to support the economy.
The Nikkei 225 index has had some top performers this year. Kobe Steel shares have jumped by more than 175% this year. The company has done well as demand for steel rose. Also, there are signs of M&A deals in the industry. On Monday, US Steel rejected a deal from Cleveland-Cliffs. It also received an offer from Esmark, a private company.
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Other top performers in the Nikkei index this year are Advantest, Kawasaki Kisen Kaisha, Toyota Tsusho, Mitsubishi, Marubeni, and Tokyo Electric. All these shares have jumped by more than 60% this year.
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On the other hand, the worst-performing Nikkei 225 index this year are Nippon Telegraph & Telephone, Sumitomo Dainippon, Pacific Metals, Toho Zinc, and Olympus. All these stocks have fallen by more than 20%.
Nikkei 225 index forecastCopy link to section
The 4H chart shows that the Nikkei index has been in a bearish trend in the past few weeks. It peaked at ¥24,0222 in June and has dropped by about 5% to the current ¥32,327. The index has formed a descending channel shown in blue and is oscillating at the 50-period and 25-period moving averages.
Therefore, the outlook for the Nikkei 225 index is neutral with a bullish bias. In the upper side, the resistance level to watch is at ¥33,480 (August 1 high) and ¥31,690 (August 3rd low).