Nikkei Breakout Accelerates with Yen Weakness Returning

The Nikkei index has started October with a powerful rally, breaking through key technical levels and retesting former downtrend resistance. This move is being driven in part by renewed weakness in the yen, which is supporting export-heavy Japanese equities.

A look at historical data shows that strong starts to the month have historically been followed by further gains for the Nikkei. However, this trend is not reliable enough to be trusted as a signal, and there are other factors at play.

The technical picture remains bullish, with RSI (14) and MACD providing complementary signals. However, after such an aggressive run, the risk-reward for chasing at current levels is becoming less attractive.