Nikkei 225 Index Jumps 0.9% Amid Wall Street Rally, Breaks Above Key Resistance Level

• Nikkei 225 index jumps 0.9% on Friday to break above the key resistance level amid a weakened Yen
• Rebounding US Stock futures help to uplift Nikkei 255 Index after a Hotter than Expected U.S. Inflation data 
•  Japan's government is considering extending its 60-year limit on the operation of nuclear power plants 
• The Best performing stock today in the NIkkei 225 Index gained by 7.38%, while the worst-performing stock shed by 0.27% as of 05:40 UTC+ 03:00

Nikkei 225 index jumped on Friday to build on its steady intraday ascent from the vicinity of the 26078.29 level. As per press time, the index is up 0.9% for the day and shows no signs of bullish exhaustion amid a weakened Japanese Yen.

The Japanese yen plunged to its lowest levels against the U.S. dollar since 1990 overnight before paring losses and still trading at 147-levels. The U.S. Dollar index, which measures the greenback against a basket of other currencies, rallied on Thursday following the hotter-than-expected inflation data, which confirmed Jumbo FEDs rate hikes. The report has cemented expectations for a 75bps rate increase and removed the need to begin preparing the markets for a downshift in tightening for the December meeting.

According to the Bureau of Labour Statistics, the consumer price index increased 0.4% for the month, more than the 0.3% Dow Jones estimate. On a 12-month basis, so-called headline inflation was up 8.2%, off its peak of around 9% in June but still hovering near the highest levels since the early 1980s. Excluding volatile food and energy prices, core CPI was even higher for the month, accelerating 0.6% against the Dow Jones estimate for a 0.4% increase. Core inflation was 6.6% from a year ago, the biggest 12-month gain since August 1982. The report initially rattled financial markets, with stock market futures plunging and Treasury yields moving up as traders priced in likely more aggressive interest rate hikes ahead from the Federal Reserve. However, those earlier losses reversed in morning trading, and the Dow Jones Industrial Average rose more than 800 points by 1:30 p.m. E.T.

In other news, Jobless claims for the week ended Oct. 8 totalled 228,000, an increase of 9,000 from the week before, the Labor Department reported Thursday. That was just slightly ahead of the 225,000 estimates but still indicates that layoffs are low. This followed last week's Nonfarm payrolls, which rose 263,000 in September, and the unemployment rate fell to 3.5%, tied for the lowest since late 1969. Lifting the NIkkei 225 INdex could be the news of Japan's government's consideration to extend its 60-year limit on the operation of nuclear power plants and may submit legislation on new rules next year, as it grapples with tight energy supplies and rising costs, the Nikkei daily reported on Friday. The new regulations under consideration would remove limits on nuclear plant operation, allowing repeated extensions if approved by the Nuclear Regulation Authority, the newspaper said, citing a draft by the Ministry of Economy, Trade, and Industry.

In the Nikkei index, the best-performing stocks today were Fast Retailing which had gained 5810.0/ 7.38% to trade at 84,490 as of 05:40 UTC+ 03:00. This was followed by Rakuten Inc, which had gained 32.0/5.11 to trade at 658.00. Following Rakuten Inc Stock was NTT Dara Corp stock which had gained 97.0/5.04% to trade at 2002.0. Finally, we had Sony Inc stock coming fourth among the best-performing companies today, gaining 463.0/4.98% to trade at 9768.0. On the other end of the stick were the worst-performing stocks in the Nikkei 225 Index, which included N.H. Foods which had shed 10.0/0.27% to trade at 3640.0 as of 05:40 UTC + 03:00. Following NH Food's stock was J. Front Retailing stock which shed 2.0/0.17% to trade at 1158.0.

Going forward, challenging the Upside move for the Nikkei 225 Index would be any Bank of Japan(BOJ) intervention, something which the BOJ, so far, has shown no inclination to hike interest rates, marking a big divergence in comparison to a more hawkish stance adopted by other major central banks.

Technical Outlook: Nikkei 225 Four-Hours Price Chart

From a technical standstill using a four-hours price chart, spot prices are now looking to extend the momentum beyond the downward-sloping trend line from the September 2022 swing high. The move beyond the previous YTD top at around the 26980.26 mark confirmed a solid bullish breakout and supported prospects for additional gains. Some follow-through buying would lift spot prices toward the next barricade at the 27183.67 resistance level( forms the shoulder part in a head and shoulder pattern). If buyers break above this ceiling, the focus would now turn toward the 27392.16 resistance level( the Head part of the head and shoulder pattern). Sustained strength above this level would uplift spot prices toward the Key Supply zone ranging from 27558.95- 27704.89 levels. 

All the technical oscillators are in positive territory. That said, the RSI(14) at 60.4 is on the verge of flashing overbought conditions with the Moving Average Convergence Divergence (MACD) crossover at -108.8070 level on the verge of moving above the signal line pointing to a bullish sign for price action this week.

On the Flipside, if dip-sellers and technical traders jump in and trigger a bearish turnaround, the initial resistance will be at the demand zone ranging from 26249.02- 26358.24 levels. If sellers manage to pierce this floor, it would negate any near-term bullish outlook and pave the way for aggressive technical selling.