Nikkei 225 Technicals – Monthly Candle Turns Red for the First Time

Bulls nightmare is slowly becoming a reality. Nikkei 225 has dipped below July’s opening levels today. With 2 more trading days left in this month, the window of opportunity for bulls to prevent a bearish disaster forming is closing. And to think that we started July so brightly, with price pushing above the 14,000/61.8% Fib retracement, and 14,450 resistance level easily after 6 days of trading in July. It is hence a strong emphatic sign of defeat for bulls that a bearish hammer candlestick is showing currently.

Monthly Chart

The least bulls can do from now is to make the candlestick green again. But even then that may not be enough to halt the bearish onslaught, as price should preferably break above the 61.8% Fib in order to place the uptrend back into play. By trading below the 61.8% Fib, the downtrend is back in play again with 50.0% Fib the 1st level of target to hit and preferably break in order to advance the bearish cause.

Hourly Chart

Short-term chart is extremely bearish, with a slight rebound currently seen, but is unlikely to break away from the descending Channel Top. Even if prices does break Channel Top from here, the consolidation range from 13,800 – 1,970 almost ensure that a break of 14,000 will be a bridge too far for bulls to attempt within the next 2 days. As such, it is almost certain that bulls’ fate are sealed. Does that mean that we should simply sell right now? Of course not. After looking at 3 consecutive Hammers/Inverted Hammers being formed, we cannot take anything for granted as this shows that market volatility is high. Watch out for price action for the next 2 days, and should bulls indeed pull a rabbit out of the hat and breach 14,000, the sheer audacity of the move may help to renew bullish initiative once again.

Traders interested to understand more about the fundamental reasons why Nikkei 225 is so bearish right now may wish to check on USD/JPY, which is trending lower currently. Whether the decline in Nikkei 225 is driven by a stronger Yen or the other way round is debatable, but one thing is certain – market sentiment is highly bearish thanks to the whole kerfuffle surrounding the sales tax hike. The ramifications go beyond the actual economy damage the tax increase may bring, but actually highlights the unity within Shinzo Abe’s lieutenants. Market tends to hate disunity, and Shinzo Abe will need to restore confidence back quickly before the market punish him further. There is only 2 days left – the clock is ticking.

More Links:
GBP/USD – Rests Under Resistance at 1.54
AUD/USD – Continues to Place Pressure on Resistance Level at 0.93
EUR/USD – Settles Just Under Resistance at 1.33

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