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Talking Points:

- The Nikkei 225 continues to pivot around the 16,500 level

- Push lower after BoJ quickly bought from around 16,000

- Gains appearing to be corrective in the context of the near term downtrend, OBV divergence

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The Nikkei 225 is trading sideways, pivoting around the 16,500 level after a clean push lower following the BoJ rate decision was immediately bought from the lows around 16,000.

The move lower seemed to have coincided with a “bearish engulfing” pattern just below the 17,000 figure and a trend line resistance, but the speed in which lower prices were picked up after the BoJ move might be indicative of possible higher prices ahead.

With that said, OBV is showing a short term divergence on the move higher, while volatility is still subdued (on ATR 14-day study). Taken together, this paints a technical picture that might still favor continued sideways movements in the short term until a catalyst presents itself.

The Nikkei 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.

A move below the 16,000 area could expose the 15,000 range lows once again.

A break above the 17,000 handle could put focus on the 2016 range highs below 18,000.

Nikkei 225 Daily Chart: August 1, 2016

--- Written by Oded Shimoni, Junior Currency Analyst for DailyFX.com

To contact Oded Shimoni, e-mail oshimoni@dailyfx.com

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