- 16,500 held as support with a bullish short term technical sign
- Index now trading near potential resistance after four days of gains
- A break above 17,000 could prove key going forward
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The Nikkei 225 is trading higher for the fourth consecutive day, alongside declining Yen prices, after the index formed a bullish “Hammer” formation on the 16,500 support.
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 move to the upside has seen the index trade to a resistance area below 17,000; a confluence resistance zone with the 17,000 handle, 200-day SMA and the last swing highs.
At this stage, a break and a hold above 17,000 seems key for further upside gains, potentially exposing the longer term range top.
If the index reverses from this zone, focus might shift to 16,500 again for support, anda break lower could put the spotlight on the 16,000 level.
Volatility continues to become even more subdued, with 20-day ATR volatility measures now indicating the lowest levels since late 2014.
Nikkei 225 Daily Chart (With USD/JPY overlay): August 31, 2016
--- Written by Oded Shimoni, Junior Currency Analyst for DailyFX.com
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