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Nikkei 225 Technical Analysis: Index Diverging From Other Risk Assets

Nikkei 225 Technical Analysis: Index Diverging From Other Risk Assets

Oded Shimoni, Junior Currency Analyst

Talking Points:

- 16,500 held as support with a bullish short term technical sign

- The hold above the level might shift focus to 17,000

- Index moving in tandem with USD/JPY diverging from other risk assets

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The Nikkei 225 is trading higher at the time of writing, after the index managed to form a bullish “Hammer” formation on the 16,500 support highlighted in past reports.

At this stage, the Nikkei is trading in opposite direction to other risk assets, such as the ASX 200 or SPX 500, possibly implying that the move is correlated with declining Yen prices (see brown line in chart below), while US stocks decline following the Yellen speech this past friday.

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 rebound to close above 16,500 seems likely to shift focus to a resistance area around 17,000; a confluence resistance zone with the 17,000 handle, 200-day SMA and the last swing highs.

If the index manages to clear 17,000, eyes seem likely to be on the longer term range top.

With that said, a break below 16,500 could potentially put the spotlight on the 16,000 handle for support, followed by the 15,000 range lows.

Volatility is still extremely subdued, with 20-day ATR volatility measures indicating the lowest levels since August last year, just prior to the china induced plunge lower.

Nikkei 225 Daily Chart (With USD/JPY overlay): August 29, 2016

Nikkei 225 Technical Analysis: Index Diverging From Other Risk Assets

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

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

Follow him on Twitter at @OdedShimoni

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

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