8th biggest Nikkei 225 fall on Brexit shock - Nomura

Shoko Tani, Research Analyst at Nomura, notes that in the aftermath of Brexit, major market volatility with sharp declines in Japanese equities were witnessed and the USD/JPY saw its biggest fluctuation in USD/JPY since 1985.

Key Quotes

“The Nikkei 225 opened up slightly on 24 June, but then fell rapidly on the Brexit result to close at 14,952. The one-day decline of 1,286 was the eighth largest on record. USD/JPY fell sharply, and the daily fluctuation of over ¥6 (as of 15:00 JST on 24 June) was the largest since 1985.

The 24 June closing price for the Nikkei 225 of 14,952.02 is slightly below the previous year-to-date low of 14,952.61 recorded on 12 February, but higher than the previous low of 14,532 (on 17 October 2014). Meanwhile, a 50% retracement of the 12,708 rise from 8,160 on 25 November 2011 to 20,868 on 24 June 2015 is 14,514. With so many inflection points close to 14,500, we think the Nikkei 225 may well find support at this level. Assuming it broke out on the downside, it might fall below 14,000 as the next downside support lines are at 13,900–14,000, including 13,961, a 50% retracement of the 13,814 rise from the post-1990 low of 7,054 on 10 March 2009 to the 24 June 2015 high of 20,868, and the 14 April 2014 closing price of 13,910.

USD/JPY temporarily below 100 for first time in two years and seven months. USD/JPY was trading at 102.42 as of 15:00 JST on 24 June. However, at one stage it was down at 99.00. We see the next downside support lines as 94.67, a 61.8% (Golden Ratio) retracement of the rise in USD/JPY from 75.52 on 31 October 2011 to 125.66 on 8 June 2015, and 93.75 on 13 June 2013.”