Japanese markets gained strength as a weaker yen and positive investor sentiment boosted equities and commodities. Despite some cautious economic data, overall momentum remains upbeat with potential for further gains.

Japanese equities surge on softer yen and strong risk appetite

Japanese stocks surged notably on Wednesday, with the Nikkei 225 closing at 38,832.65 – its highest level in four months – driven by a softer yen and renewed investor confidence in risk assets.

The index climbed 1.7% during the session, gaining momentum in the afternoon after breaking above the 38,140.65 intraday support. The Nikkei peaked at 38,904.65 before slightly retreating to close near its highs.

This bullish sentiment extended to commodity-linked markets. Osaka Exchange rubber futures for November delivery rose 2.69%, settling at 305 yen per kilogram, reaching an intraday peak of 305.6 yen, the highest since late May.

Weather and currency trends support commodity and equity gains

Weather disruptions continue to underpin the rally, as heavy rainfall hampers rubber tapping operations in Japan and major producers like Thailand.

Flash flood warnings issued for 20–23 June in Thailand have heightened concerns over potential crop damage and near-term supply constraints.

Currency moves further boosted Japanese equities. The yen slid to a one-week low of 145.445 against the US dollar, enhancing the appeal of Japanese stocks to foreign investors.

The inverse relationship between the yen and the Nikkei remains intact, with a weaker yen supporting exporters and attracting overseas demand for yen-denominated assets.

However, Japan’s recent macroeconomic data added a cautious note. Exports declined in May for the first time in eight months, largely due to lower automobile shipments.

Ongoing US tariffs are pressuring Japanese car exports, raising concerns about potential weakening in rubber demand if manufacturing activity slows.

Despite this, immediate supply tightness coupled with speculative buying appears to be the dominant factor driving prices currently.

Technical analysis: Momentum and resistance levels to watch

The Nikkei 225 demonstrated strong gains during the latter part of Wednesday’s trading, closing at 38,832.65 – up more than 1.7% from the opening level.

After a period of consolidation through much of 17 and early 18 June, the index broke decisively above the 38,140.65 support, triggering a sharp rally that hit an intraday high of 38,904.65 before easing slightly near the close.

Technical indicators confirm the bullish momentum. The MACD histogram displayed several robust green bars, signalling upward pressure, although the MACD line’s slope is flattening, suggesting possible short-term fatigue.

Price action is approaching resistance in the 38,850 to 38,900 range, a zone that has previously capped advances.

Meanwhile, the 5-, 10-, and 30-period exponential moving averages (EMAs) remain bullishly aligned and sharply diverging, reinforcing the strength of the current trend.

Given persistent adverse weather forecasts and prevailing risk-on sentiment in Tokyo, the Nikkei and rubber futures may continue to face upward pressure through the week.

Traders should closely monitor evolving weather conditions and Bank of Japan policy announcements, as these factors could trigger either a pause or acceleration in price movements.

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