The Nikkei 225 stock index, also known as Japan 225 on FXOpen, has reached the 42,000 milestone today, approaching its all-time high.
Several factors are fueling this upward trend:
→ Corporate news: Positive quarterly earnings from major companies like Sony Group and SoftBank have bolstered market sentiment.
→ Trade developments: There is growing optimism regarding a potential tariff agreement between Japan and the United States. Recent news from Reuters states that the U.S. has agreed to adjust overlapping tariffs on Japanese goods to avoid double taxation, a move that has further increased investor confidence.
Analysis of the Nikkei 225 Chart
We previously highlighted an ascending channel shaping price movements in 2025. This channel remains valid, with the current price situated in the upper range. The channel’s median line could serve as a crucial support level in the short term.
Recent price action is notable: a strong bullish candle has emerged right after breaking above the 41,280 resistance level (indicated by an arrow), signaling a clear advantage for buyers.
Potential bearish factors:
→ Overcoming the psychological barrier at 42,000 might pose a challenge as the index struggled to sustain levels above it in late July.
→ The RSI has entered the overbought zone, hinting at potential exhaustion.
→ A failure to maintain levels above 42,000 could confirm a Double Top pattern, indicating possible downward pressure.
Potential bullish factors:
→ The price could continue its upward trajectory towards the upper boundary of the ascending channel.
→ The recent bullish candle displays characteristics of an FVG (Fair Value Gap) bullish pattern, potentially forming a future support level.
→ Additional support may come from the orange trendline and the former resistance now turned support level at 41,280.
There is still a possibility of a breakout above 42,000. The critical question now is whether the market optimism can be sustained as the price nears the upper boundary of the channel.
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