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Talking Points:

- 16,500 held as support for the last week, but price is currently trading lower

- A hold below the level might shift focus to 16,000

- Volatility hits 2016 lows (based on 20-day ATR readings), lowest since August last year (pre-China)

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The Nikkei 225 is trading below support at 16,500 at the time of writing, after the index managed to hold the level for the last week.

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

Volatility has been extremely subdued this week, with 20-day ATR volatility measures indicating the lowest levels since August last year, just prior to the China induced plunge.

This might set the stage for potential movement on event risk going forward, starting from the Yellen speech today.

At this stage, a hold below 16,500 could potentially put the spotlight on the 16,000 handle for support, and a break lower could expose the 15,000 range lows.

A rebound and a 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 potential trend line resistance.

Nikkei 225 Daily Chart: August 26, 2016

--- 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

original source

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