Bullish SGX Nikkei 225 Futures on delayed BOJ hike and Fed cut
By Danish Lim Zhi Lin, Investment Analyst
Current Performance of SGX Nikkei 225:
As of 26 June, at 10:40 SGT, the SGX Nikkei 225 Index Futures contract was up by 1.52%, led by
semiconductor-related stocks Tokyo Electron and Advantest. Sumitomo Pharma surged following
reports it is considering layoffs and a new plant. This would mark the 3rd consecutively daily gain, underpinned by dip-buying activity following a weak April (-5.03%) and May (-0.05%).
Based on our technical target levels, the contract looks to have breached immediate resistance at around 39,225. We believe this puts it on track to hit our target level at around 42,050 by end-2024.
Continued Yen Depreciation:
As of 27 June, the Yen has continued to depreciate, weakening to almost 160.9 per Dollar, the lowest level since 1986, ramping up intervention risks by the BOJ. Top currency official Masato Kanda reiterated that the government will take appropriate measures if there are excessive currency moves.
This comes as last week’s CPI ex fresh food reading rose by 2.5% YoY in May, up from 2.2% in April. We believe the reading gives room for the BOJ to consider hiking rates in the coming months. However, the Yen continues to depreciate due to its interest rate gulf with the US, further exacerbated by the timing of Fed rate cuts being pushed back later into the year.
Although a weaker yen has traditionally benefitted exporters, we believe yen weakness has gone too far and has resulted in higher imported inflation, eroding consumers’ purchasing power. Our research shows the correlation between the Nikkei 225 and USDJPY started turning flat once USDJPY went past 155.
Corporates have cited levels around 120-130 against the USD to be “preferable”. As such, we believe a sustainable equity rebound would require further easing of yen weakness.
Nikkei 225 Outlook & Trading Opportunity:
In our opinion, we expect delayed BOJ rate hikes and delayed FOMC rate cuts to eventually translate into an eventual easing of yen depreciation pressure.
This will support a Yen rebound to more comfortable levels- enabling Japanese equities to sustainably outperform in 2H 2024. Corporate governance reforms should provide support for Japanese equities over the medium to long term.
We see any near-term weakness or pullback as an entry opportunity.
Expressing Our View:
We maintain our trade setup below to express our view:
Long SGX Nikkei 225 Index Futures
The daily chart shows the contract having broken above the 0.236% Fibonacci extension level and is headed towards the 0.382% extension level at around 40,780.
With a Trend-based Fibonacci Extension drawn from the October 2023 low, we set our target level at the 0.50% extension level around 42,050. Stop loss is set below the key support level at 36,650.
This setup delivers a reward: risk ratio of 2.03x.
• Entry Level: 38,430 (previous entry level)
• Target Level: 42,050
• Stop Loss Level: 36,650
• Profit at Target: 3620 x ¥500= ¥1,810,000
• Loss at Stop: 1780 x ¥500= ¥890,000
• Reward: Risk Ratio: 2.03x
Trade Nikkei 225 at only 50 cents* now
Ride the waves of the Nikkei 225—trade SGX Nikkei 225 Index Futures for as low as 50 cents* and you could win a pair of air tickets to Japan. Discover more here.
*For applicable terms and conditions and a full risk disclaimer, please refer to
phillipnova.com.sg. This ad has not been reviewed by MA
Current Performance of SGX Nikkei 225:
As of 26 June, at 10:40 SGT, the SGX Nikkei 225 Index Futures contract was up by 1.52%, led by
semiconductor-related stocks Tokyo Electron and Advantest. Sumitomo Pharma surged following
reports it is considering layoffs and a new plant. This would mark the 3rd consecutively daily gain, underpinned by dip-buying activity following a weak April (-5.03%) and May (-0.05%).
Based on our technical target levels, the contract looks to have breached immediate resistance at around 39,225. We believe this puts it on track to hit our target level at around 42,050 by end-2024.
Continued Yen Depreciation:
As of 27 June, the Yen has continued to depreciate, weakening to almost 160.9 per Dollar, the lowest level since 1986, ramping up intervention risks by the BOJ. Top currency official Masato Kanda reiterated that the government will take appropriate measures if there are excessive currency moves.
This comes as last week’s CPI ex fresh food reading rose by 2.5% YoY in May, up from 2.2% in April. We believe the reading gives room for the BOJ to consider hiking rates in the coming months. However, the Yen continues to depreciate due to its interest rate gulf with the US, further exacerbated by the timing of Fed rate cuts being pushed back later into the year.
Although a weaker yen has traditionally benefitted exporters, we believe yen weakness has gone too far and has resulted in higher imported inflation, eroding consumers’ purchasing power. Our research shows the correlation between the Nikkei 225 and USDJPY started turning flat once USDJPY went past 155.
Corporates have cited levels around 120-130 against the USD to be “preferable”. As such, we believe a sustainable equity rebound would require further easing of yen weakness.
Nikkei 225 Outlook & Trading Opportunity:
In our opinion, we expect delayed BOJ rate hikes and delayed FOMC rate cuts to eventually translate into an eventual easing of yen depreciation pressure.
This will support a Yen rebound to more comfortable levels- enabling Japanese equities to sustainably outperform in 2H 2024. Corporate governance reforms should provide support for Japanese equities over the medium to long term.
We see any near-term weakness or pullback as an entry opportunity.
Expressing Our View:
We maintain our trade setup below to express our view:
Long SGX Nikkei 225 Index Futures
The daily chart shows the contract having broken above the 0.236% Fibonacci extension level and is headed towards the 0.382% extension level at around 40,780.
With a Trend-based Fibonacci Extension drawn from the October 2023 low, we set our target level at the 0.50% extension level around 42,050. Stop loss is set below the key support level at 36,650.
This setup delivers a reward: risk ratio of 2.03x.
• Entry Level: 38,430 (previous entry level)
• Target Level: 42,050
• Stop Loss Level: 36,650
• Profit at Target: 3620 x ¥500= ¥1,810,000
• Loss at Stop: 1780 x ¥500= ¥890,000
• Reward: Risk Ratio: 2.03x
Trade Nikkei 225 at only 50 cents* now
Ride the waves of the Nikkei 225—trade SGX Nikkei 225 Index Futures for as low as 50 cents* and you could win a pair of air tickets to Japan. Discover more here.
*For applicable terms and conditions and a full risk disclaimer, please refer to
phillipnova.com.sg. This ad has not been reviewed by MA
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