JP225 touches its lowest level since April 26

The JP225 hit its lowest level since April 26th, briefly touching 37606 during today's session.
 

The drop came amid a slide in US equities caused by a rise in US Treasury yields,
which hit a 4-week high.

This has raised further concerns about a possible delay in the much-anticipated interest rate cuts in the US.

At the same time, the Japanese 10-year bond yield has reached its highest level (1.1%) since July 2011.
 

This was mainly driven by the market's expectation that the Bank of Japan (BoJ) could raise interest rates, as well as the potential for the BoJ to taper its bond-buying program.

Higher interest rates may lead to an appreciation of the JPY, while Japanese indices may fall.

Investors are also waiting for confirmation that the Japanese authorities have indeed bought yen in April & early May in an effort to stabilize the national currency. The potential purchase amount is ~$22 billion.

The monthly Foreign Exchange Intervention Operations report may be released tomorrow - Friday, May 31st.

From the technical side …

The JP225 is currently trading below important simple moving averages (21-, 50-, and 100-period SMAs), underscoring strong bearish potential.

The Relative Strength Index (RSI) is in neutral territory as the markets are currently in a state of uncertainty, awaiting further macro catalysts.

On the upside, the 21-period SMA may act as a strong resistance level - a key target for the JP225 bulls in the short to medium term.

On the downside, the 37606 level (lowest since late April 2024) may provide immediate support.

A break below this level could potentially drag the index down towards the 36703 level - the lowest since February 2024.