Nikkei likely to edge up, but gains limited by yen

TOKYO (BestGrowthStock) – Japan’s Nikkei average is likely to rise on Thursday, buoyed by short-covering in the wake of four days of falls, after the yen fell back slightly and Wall Street overcame poor U.S. economic data to eke out a rise.

But worries about economic recovery still lingered, with the U.S. data showing single-family home sales slumped to a record slow pace in July, while orders for manufactured durable goods rose far less than anticipated, stoking fears of a double-dip recession.

While the yen retreated from 15-year highs against the dollar hit earlier this week, market players said market movements were unlikely to settle down without signs of some kind of policy response from the Japanese government and Bank of Japan to deal with the strong currency.

In early Asian trade, the dollar had edged up slightly to 84.68 yen.

“The Nikkei’s likely to rise a bit to start with, since on a number of technical fronts it’s definitely in a buying zone,” said Hiroichi Nishi, general manager of the equity division at Nikko Cordial Securities.

“But investors will closely watch to see if the government and BOJ take any steps to deal with the strong yen. It’s essential for the markets to see them at least expressing some kind of resolute attitude.”

The Nikkei’s relative strength index (RSI) fell to 32, with 30 and under considered oversold, while its slow stochastic fell deeper into oversold territory. The Nikkei also dropped through its lower Bollinger Band.

In a sign that stocks are likely to open higher, Nikkei futures traded in Chicago closed at 8,910, up 0.9 percent from the Osaka close.

The benchmark Nikkei (.N225: ) is likely to move between 8,800 and 9,050, market players said. It closed at 8,845.39 on Wednesday.

Market players have said that the longer the Nikkei stays below 9,000, which became a key support level several times over the past year, the greater the chances that strong resistance will develop at that point.

One target for the Nikkei stands at 8,697, a 61.8 percent retracement of the rally between its March 2009 low and April 2010 high. But otherwise, market players say, there are few technical targets below 9,000.

Wall St stages comeback as technicals spur buying (.N: ) > Yen down from 15-year peak vs dollar. U.S. bonds slip on profit-taking as stocks rise. Gold hits 8-week high as data shows flagging growth. Oil up, shrugs off data, ends 5-day losing streak.

STOCKS TO WATCH

— Parco Co (8251.T: )

Department store Parco said on Wednesday it would sell $178 million in convertible bonds to a state bank, sparking a protest from top shareholder and major real estate developer Mori Trust.

— Nissan Motor Co (7201.T: )

Nissan will raise its Russian auto sales target for the current business year to 100,000 units, up 120 percent from last year, the Nikkei business daily said.

(Reporting by Elaine Lies; Editing by Joseph Radford)

Nikkei likely to edge up, but gains limited by yen