4 min read The Nikkei 225 has now recovered the whole of its late-July breakdown and is pushing to fresh highs for the move, with the buying broadening out beyond the artificial intelligence (AI) names that led earlier in the year into banks, insurers and energy. Japanese government bond yields are climbing as markets increasingly price a Bank of Japan (BoJ) rate rise as soon as September, with the five-year yield at a record and the two-year at its highest since 1995, and US inflation data lands later today.
The 4-hour chart
The 4-hour chart shows price reclaiming the 200 SMA and the 67,000 area together, with the short reload zone sitting overhead.
Since our previous coverage of the Nikkei in late July, when the index had just lost major support, the picture has completely turned around. Price has reclaimed the teal 200 SMA on the 4-hour, and it did so at the same time as reclaiming the 67,000 area, which is a meaningful piece of confluence rather than two separate events.
The green circle marks an important break of structure area, and the bearish divergence between price and the RSI that showed up on the 4-hour earlier this month has now been invalidated. Price is breaking higher rather than rolling over, which is what a divergence would normally warn about.
Above, the index is approaching the short reload zone that starts at 69,000. That’s a level where some resistance could potentially come in, but for now the momentum looks very strong and buyers are in firm control.
The 1-hour chart
The 1-hour chart shows the 67,421 level below price, where the 50% Fibonacci retracement and the 1-hour 20 EMA converge.
Zooming in, there’s a clear level below at 67,421, where the 50% Fibonacci retracement and the 1-hour 20 EMA both come in. If we get a rejection up here, price could potentially come back down and use that level as support.
For now the bullish momentum is strong, but a retest of that area could be a potential entry point for bulls going forward.
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