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Posts tagged: TOPIX

Credit Suisse research – A top for Japan confirmed

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Credit Suisse Research

 

USDJPY finally confirms a medium-term top

As we have already highlighted on a couple of occasions this year (A major top for  Japan,  20th January),  we  have  been  bears  of  Japan,  looking  for  conclusive reversals of the bull trends in USDJPY and the Nikkei/TOPIX.  The brief spike post  the  BOJ  has  been  aggressively  reversed,  and  for  USDJPY,  the  longlooked for top below 116.15 has in our view finally been confirmed. We  thus  stay  bearish  and  look  for  further  weakness  to  113.99/85  next,  ahead of  support  from  a  rare  price  gap  from  October/November  2014  at  112.56/33. This  should  be  allowed  to  hold  at  first,  ahead  of  the  sell-off  extending  to 110.09/00  –  the  September  2014  high  and  psychological  support.  Bigger picture,  we  target  106.65/60  –  not  only  the  measured  target  from  the  top,  but also the 38.2% retracement of the entire 2011/2015 bull market. Resistance  shows  at  115.85/86  initially,  then  116.15/30,  with  117.54  needing to cap to keep the immediate risk bearish.

For  GBPJPY,  the  recovery  in  late  January  was  capped  by  a  cluster  of  resistances  at 174.87/176.18  –  the  38.2%  retracement  of  the  2015/2016  collapse,  April  2015  low  and falling  13-week  average  –  and  the  subsequent  rejection  from  here  maintains  a  large  top. Key  support  is  seen  from  the  January  2016  and  2014  lows  at  163.99/88,  below  which should  act  as  the  catalyst  for  a  resumption  of  the  downtrend  to  160.02/00,  ahead  of  the 50% retracement of the 2011/2015 bull market at 156.37.

For  EURJPY,  the  stronger  EUR  is  keeping  the  cross,  for  now  at  least,  well  supported above pivotal price and “neckline” support at 126.18/09.  Although a large topping threat is present,  only  below  126.09  would  see  this  confirmed,  turning  the  outlook  bearish  for 124.97 initially, then 121.95.

When  looking  at  the  JPY  in  Trade  Weighted  terms,  a  base  was  completed  at  the beginning  of  the  year.  The  BOJ  spike  was  contained  well  above  the  uptrend  from  June 2015,  and  the  subsequent  strong  rally  maintains  the  base.  We  thus  stay  bullish  and  look for  further  broad-based  JPY  strength.  Given  the  still  strong  relationship  between  the currency and equity markets, this is expected to keep equities under pressure.

For  the  Nikkei,  the  post  BOJ  bounce  has  also  been  quickly  reversed,  leaving  the  market retesting  its  recent  low  and  38.2%  retracement  of  2011/15  rally  at  16055/15.  Below  here, which  we  look  for,  should  confirm  a  medium-term  top  is  in  place,  for  a  decline  to  the  50% retracement  and  price  support  at  14545/30,  then  13885,  the  low  of  2014.  The  measured target from the top though is seen set lower at 12920.

The TOPIX though is already below its 38.2% retracement of the 2012/2015 bull market at 1317, and with a medium-term top already in place, we stay bullish and look for weakness to extend to our 1197/77 next target – the 50% retracement and late 2014 low.

Go  short  USDJPY  at  116.30/117.30,  place  the  stop  above  118.30.  Take  profit  at 106.75.

Go  short  Nikkei  at  17000/17200,  stop  above  17950.  Also  add  below  16000.  Take profit at 13200.

 

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