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Nikkei 225 Technical Analysis: Recovery Might be Losing Traction

Nikkei 225 Technical Analysis: Recovery Might be Losing Traction

Oded Shimoni, Junior Currency Analyst

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Talking Points:

- Gains appearing to be corrective in the context of the near term downtrend, OBV divergence

- The 17,000 handle might be in focus as price edges higher

- Clear push below 16,500 may indicate downside momentum

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The Nikkei 225 is nudging higher after posting what seems to be a break above the 16,500 level.

The price has been ranging between the well-defined 18,000 resistance zone and the 15,000 support since the start of the year, with gains appearing to be corrective in the context of the near term down trend from June 2015 highs.

The 16,500 figure is at about 50% of the 2016 trading range and seemed influential in the past for deciding short term directional conviction.

In this context, if price manages to stay above 16,500, short term momentum appears to be leaning to the upside, which might put focus on the 17,000 handle for possible resistance, before the 2016 range highs below 18,000.

With that said, OBV is showing a slight short term divergence on the move higher, while volatility is seeing a significant shift lower after the Brexit surge. Taken together, this might imply that the recovery is losing some momentum, and with reduced volatility resistance may be able to hold.

A clear move below 16,500 could signal that short term momentum favors the downside, which might put the focus on the 16,000 area for possible support.

A move below the 16,000 area could expose the 15,000 range lows once again.

Nikkei 225 Daily Chart: July 20, 2016

--- Written by Oded Shimoni, Junior Currency Analyst for DailyFX.com

To contact Oded Shimoni, e-mail oshimoni@dailyfx.com

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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