Nikkei rallies as Yellen breathes fire into USD/JPY

Japanese benchmark equity index Nikkei gapped higher and is extend gains as hawkish comments from Fed’s Yellen on Friday triggered broad based USD rally that ended up pushing Dollar-Yen higher to 102.00 levels.

Weak Yen helping stocks

Japanese stock markets, especially exporter scrips are highly sensitive to the exchange rate. Hence, the bullish move seen today is not surprising; given the USD/JPY pair ended a week long consolidation on Friday and jumped to 102.00 levels.

Yellen said, “The case for rate hike has strengthened”, which was enough for a spike in the oversold USD/JPY pair. Markets feared a drop in the pair to 96.00-94.00 levels as the pair was spending more and more time around 100.00 levels. Moreover, Bank of Japan (BOJ) and Japanese government failed to trigger Yen selling earlier this month, leaving the pair largely at the mercy of the Fed.

At the time of writing, the index was trading 2.27% higher on the day around 16,732 levels. The index had closed at 16,360 levels on Friday.

Nikkei Technical Levels

The immediate hurdle at 16,938 (July 21 high) if breached would open doors for psychological figure of 17,000. A violation there could yield 17,251 (May 31 high). On the lower side, breach of daily low of 16,616 could lead to gap filling (drop to 16,490), under which Friday’s low of 16,360 could be put to test.