Nikkei 225 falls to 39,646 amid U.S. tariff-driven selloff
Nikkei 225 consolidates near key support after rally stalls below 41,000 breakout barrier
The Nikkei 225 declined 0.44% to close at 39,646 on Thursday, while the broader TOPIX Index shed 0.56% to 2,812, as investor sentiment deteriorated in response to stalled trade negotiations between the U.S. and Japan. President Donald Trump’s announcement of a 25% tariff on Japanese goods, set to take effect on August 1, rattled markets.
Highlights
- Nikkei 225 fell 0.44% to 39,646 amid renewed U.S.–Japan trade tensions
- Price consolidates near 39,600, testing key support levels after rally exhaustion
- Breakout above 40,000 or breakdown below 38,800 may decide next leg
Japanese Prime Minister Shigeru Ishiba described the move as “truly regrettable,” though he expressed openness to further dialogue. Analysts expect the tariffs to shave 0.8% off Japan’s GDP in 2025 and a cumulative 1.9% through 2029. Top decliners included Tokyo Electron, Nintendo, Sony Group, and Mitsubishi Heavy Industries.
Price action consolidates below resistance as volatility narrows
Technically, the Nikkei 225 is locked in a consolidation range after peaking near 41,000. The price is now hovering near 39,600, sitting just above the ascending trendline support and an important EMA cluster around 39,600–39,290. This region is acting as a critical inflection point. While the daily structure remains bullish above 38,800, failure to break out above 40,000 may indicate exhaustion and increase downside risk toward 38,800 or even 37,400.
Nikkei 225 index forecast (Source: TradingView)
Bollinger Bands on the 4-hour chart have narrowed sharply, signaling reduced volatility following the rally. Price is positioned near the midline around 39,880, showing indecision. Momentum indicators remain soft, with RSI at 49 and MACD printing mild bearish divergence on lower timeframes. A clean breakout above 40,000 would be needed to revive strong upside momentum, while a close below 38,800 could signal the start of a broader correction.
Outlook hinges on breakout confirmation
In the short term, the Nikkei 225 remains range-bound between 39,200 and 40,800, with traders awaiting fresh catalysts. The ongoing trade standoff with the U.S. adds further uncertainty, and a resolution could determine near-term direction. Until then, the index is expected to consolidate near its mid-range, with technical structure still favoring bulls unless 38,800 breaks.
In our previous analysis, we highlighted the risk of exhaustion near the 41,000 region and emphasized the importance of the 39,600–39,290 support cluster. That zone remains in play today as the Nikkei 225 seeks a directional breakout.
