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Talking Points:
- Potentially game-changing implications for global financial markets could impact the Nikkei
- Difficult to find any tradable scenarios at the moment due to the EU Referendum
- Very long term view might be required for now as polls begin to take votes
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The Nikkei 225 is trading above the 16,000 handle after finding support at the 15,500 level, as we approach the decisive hours of the EU Referendum. The index has been trading sideways since the start of the year, but volatility is expected to dramatically shift in the hours and days ahead, as we face a resolution to the so called “Brexit” referendum, which could potentially have game-changing implications for the global financial markets.
Indeed, it appears difficult to find reasonable risk-reward trading scenarios at the moment, due to the uncertainty and implied volatility, which in turn might suggest that a very long term view is required for the hours and days ahead, as short term technical levels seem unlikely to have any significance. Taking this into consideration, we turn our attention to the Monthly chart.
Nikkei 225 Monthly Chart: June 23, 2016
The long term up trend from 2009 is in focus looking at the chart above. The Fib was drawn for the last monthly leg higher from the June 2012 low at 8,190 to the June 2016 high at 20,961, and reveals possible interesting levels on a move lower.
The price currently sits just above the 16,000 handle, which coincides with the 0.382 Fib, but with such proximity, it appears unlikely that the levels could hold a volatility burst from “Brexit” related news.
This might put the focus initially on the 0.50 Fib at 14,518 that together with the 15,000 handle might form a possible area of support.
Further levels of interest on a move lower could be the 14,000 handle and the 0.618 Fib which coincides with the 13,000 handle.
Initial possible resistance might be found at an area around the 18,000 handle to 18,300, followed by the big 20,000 figure.
June 2016 highs are further ahead, and a break above could potentially expose the 22,000 handle followed by a resistance zone between the 22,500 figure and the 23,000 handle.
--- Written by Oded Shimoni, Junior Currency Analyst for DailyFX.com
To contact Oded Shimoni, e-mail oshimoni@fxcm.com
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