Here’s why the Nikkei 225 is crashing its Asian peers today

The Nikkei 225 is the best-performing index in Asia today. It is up by more than 4.70% and its trading at ¥22,545. All companies in the index, save from one, are up today. Similarly, other key indices in Asia are up, with the Shanghai, Hang Seng, and A50 up by 1%, 3%, and 1.10% respectively

Weaker Japanese yen saves the Nikkei

As I wrote yesterday, most companies in the Nikkei 225 are export oriented. This means that they make most of their income from exports. For example, automobile giants like Nissan, Toyota, and Honda sell more than 70% of the cars they produce abroad. The same is the case for companies like Mitsui, Mitsubishi, and Nippon Sheet.

Therefore, these companies benefit when the Japanese yen is weak. And today, following the BOJ interest rate decision, the yen is slightly weaker than the US dollar. It has lost about 0.20%, which is a good thing for the Nikkei companies.

In its decision, the bank left the key lending rate unchanged and maintained its yield curve control and quantitative easing program. The bank also expects the economy to recover from the ongoing slump.

Coronavirus risks ebb

The Nikkei 225 index also rose because the risks of a second wave coronavirus infection have eased. This is after China announced significant measures of testing and isolation in Beijing after about 100 people were caught with the disease. According to CNN, the country has tested thousands of people in a matter of  few days in a bid to curb its spreading.

Key movers in the Nikkei 225

Most companies in the Nikkei 225 index are in the green today. The best performer is Taiheiyo Cement, whose shares rose by more than 11%. It was followed by JFE Holdings, IHI Corp, and Yamaha Motor, whose shares rose by more than 10%. Automakers like Mitsubishi, Mazda, Suzuki, and Hino also rose sharply.

On the other hand, Sony Financial, Chubu Electric Power, Idemitsu, and NTT Docomo were the key laggards.

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Nikkei 225 technical outlook

The Nikkei 225 index is trading at ¥22,538, which is the highest it has been since June 11. During its surge today, the index moved above the 78.2% Fibonacci retracement level. It is also slightly above the 50-day and 100-day exponential moving average. The two averages are making a crossover around the 61.8% retracement level. Therefore, with this rally, there is a possibility that bulls will be energized and attempt to test the previous high above ¥23,000.

On the flip side, a move below today’s open at ¥22,000 will invalidate this prediction.

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