JP 225 forecast: the index is correcting

The JP 225 stock index is correcting after falling by more than 18% and may overcome the resistance level. The JP 225 forecast for today is negative.

JP 225 forecast: key takeaways

• Recent data: Japan’s services PMI came in at 51.2 in July
• Market impact: the effect on the Japanese stock market is mixed

JP 225 fundamental analysis

Japan’s services PMI fell to 51.2 in July, below a forecast of 51.9 and down from a previous reading of 52.2, which is a moderately negative signal for the Japanese economy. The indicator remains above the 50-point threshold separating expansion from contraction. This means that the services sector continues to grow, although the pace of growth has slowed significantly and came in below market expectations. Such dynamics may indicate weaker domestic demand, more cautious behaviour by consumers and businesses, and a gradual slowdown in economic activity following the stronger results recorded in the previous period.

For the JP 225 index, the initial reaction may be moderately negative. Weaker data could raise concerns about the sustainability of Japan’s economic recovery and the outlook for corporate earnings growth, especially for companies whose operations depend primarily on the domestic market. However, the scale of the decline in the PMI is not yet sufficient to form a pronounced negative scenario.

JP 225 technical analysis

The JP 225 index completed its decline and began a correction. A new support level has formed around 60,445.0, while the nearest resistance is located at 67,305.0. The price is headed towards the resistance level, and a breakout above it would signal a shift to an uptrend. The index may also initially enter a sideways range. If the decline resumes, the next target could be 57,245.0.

The JP 225 price forecast outlines the following scenarios:

• Pessimistic JP 225 scenario: a breakout below the 60,445.0 support level could send the index down to 57,245.0
• Optimistic JP 225 scenario: a breakout above the 67,305.0 resistance level could boost the index up to 71,265.0

Summary

The release of Japan’s services PMI is moderately negative for the Japanese stock market, but it does not indicate that the economy has begun to contract. The JP 225 is likely to show a moderate negative reaction followed by stabilisation. Companies focused on domestic demand, the financial sector, and consumer services may come under pressure. Exporters, by contrast, could receive support if the yen weakens and expectations of further Bank of Japan rate hikes decline. The next downside target for the JP 225 could be 57,245.0.

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