The Nikkei 225 Index Futures (CME: NIY) are enjoying a bullish start to the week after the release of the Japanese Producer Price Index (PPI) data helped the index futures extend a push above the 16-month high of 29360. The index futures rose over 0.4% during the Monday trading session after the PPI data for April came in at 5.8%, falling from 7.4% a year ago, refuelling bets on the potential continuation of the BoJ’s ultra-loose monetary policy and continuing the downward pressure on the Yen.

Investors will now shift their focus to the various Fed speeches due later today, which can impact the direction of the USDJPY currency pair during the session. The market will also be mindful of the economic indicators from the Chinese economy, with the Fixed Asset Investment, Industrial Production, Unemployment Rate and Retail Sales all due tomorrow.

Technical

The 4H chart shows that the price action continues to trade within an ascending channel as the bulls continue to chirp away on the bears’ footing. With the bullish sentiment firmly driving the index futures, investors could be keen on the reaction of the index futures to the upper trendline of the channel. A break above the trendline could trigger a run towards the resistance level at the 30535 psychological level.

However, failure to sustain a break above the channel’s upper trendline could trigger a pullback towards the 16-month high at 29360. The fall of 29360 would bring the lower support levels into play, with the 50-day moving average and the channel’s lower trendline offering immediate support to the index futures.

Summary

With the market firmly focused on the US for the Fed members’ speeches, a potential exists for the bullish sentiment to continue to drive the USDJPY lower and the index futures higher. Thus, a trading opportunity could exist as the price actions break above the trendline towards the 30535 resistance level. However, failure would leave a potential for a pullback towards the 29360 in play.

Sources: TradingView, Reuters.

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