The Nikkei 225 Futures (CME: NIY) surged due to Chinese authorities’ reduced stamp duty on stock trades. According to the finance ministry, this strategic adjustment aims to breathe new life into the equity market and elevate trader confidence. Will this move have the desired effect, or will macroeconomic indicators continue to dampen gains?  

Amid these market movements, US Federal Reserve Chair Jerome Powell’s statement regarding inflation resonated. Powell emphasised the ongoing challenges of inflation and expressed the central bank’s willingness to consider further rate hikes if deemed necessary. Given the 0.2% rise in headline inflation in July and sticky core inflation, another rate hike before the end of the year may be on the table. However, an interest rate increase remains data-dependent as the Fed continues to express caution, encouraging the equity market to experience modest gains.   

Technical 

A downward trend threatened the Nikkei 225 Futures on the 4H Chart after the price action edged out of the ascending channel pattern at the Golden Ratio. A breakdown below the moving averages encouraged a further pullback as the swing highs struggled to sustain upside traction. Since the index futures have edged above the 50-day and 100-day moving averages, an uptrend may arise if the price action legs up towards the 32,255 resistance.  

However, the 32,145 resistance at the 38.20% Fibonacci Retracement could hold, which may encourage a pullback towards the 31,325 support. If the 31,325 support fails to hold, the index futures may be further encouraged to retest lower support levels, which may promote the continuation of a downtrend. 

Summary 

The Nikkei 225 Futures ticked up on the backdrop of reduced stamp duty on stock trades in China. If the upward momentum continues, the index futures may be encouraged to retest the 32,255 resistance. However, the 32,145 level could hold, promoting a pullback towards the 31,325 support.  

Sources: TradingView, CNBC