The Japanese Nikkei 225 benchmark pause today the rally which started June 3 and after six positive sessions in a row. Nikkei 225 finished 0.06 percent lower at 21,176 after news that President Trump was holding up a trade deal with China and had no interest in moving ahead unless Beijing agrees again to four or five “major points” that Trump did not specify. Japan’s machinery orders, unexpectedly rose for a third straight month in April, helped by the strength in domestic demand. Sentiment for equities has improved around the globe as investors increase bets that FED will proceed with three rate cuts until the end of the year. I believe that the longer the trade war goes on, and tariffs are in place against China, the more likely is that the Fed will cut rates.
On the technical side Nikkei 225 short term positive momentum is still intact as the Japanese benchmark holds above the 20 day moving average and also today stopped at the 20 hour moving average. On the upside first resistance stands at 21,304 the 150 day moving average while extra offers will emerge at 21,453 the 50 day moving average. On the flipside immediate support stands at the 20 day moving average at 21,000 while solid support for the index can be met 20,647 the previous week low. The Japanese economy, world’s third-largest economy is facing growing downward pressure as the U.S.-China trade war intensifies and global demand wanes, while at home consumers are reluctant to spend.