By IFCMarkets

Technical setup bullish for Nikkei

Japanese economic data of the last couple of weeks were mixed. Machinery orders declined less than forecast in March, while trade deficit narrowed in April. On the other hand, drops in both industrial production and retail sales were bigger than forecast in April. Thus , machinery orders declined 0.7% over year in March after 2.4% fall in February when a 9.5% drop was forecast. Trade deficit narrowed to 930 billion yen after 5.4 billion deficit in March. Industrial production fell 9.1% over year in April after 3.7% decline in March, when 5.1% fall was expected. And retail sales dropped 13.7% over year after 4.7% decline in March when 11.5% drop was expected. Weak data are downside risk for Nikkei. At the same time Japanese government announced fourth aid package to combat coronavirus damage. The $1.1 trillion stimulus package was announced on Wednesday May 27. It includes rent subsidies for individuals as well as small and medium sized businesses; a one-time $1,860 payment to each front-line medical worker and increased subsidies to businesses hit by the pandemic. The stimulus measures boosting government spending and subsidies are bullish for Nikkei.

Summary of technical analysis

Market Analysis provided by IFCMarkets