Nikkei 225 index slips to two-week low as tariff tensions and soft Japan data stall momentum
Nikkei 225 holds above 39,200 as traders weigh tariff pressure and range breakout potential
Japanese stocks edged lower on Monday, with the Nikkei 225 Index falling 0.28% to 39,459 and the broader TOPIX down 0.02% to 2,823, as renewed trade tensions and mixed domestic economic data weighed on sentiment. The declines came after U.S. President Donald Trump announced a 30% tariff on imports from the European Union and Mexico, effective August 1.
Highlights
- Nikkei 225 falls 0.28% to 39,459 amid U.S. tariff shock and weaker Japan machinery orders
- Index compresses beneath 41,000 resistance as trendline support holds firm around 39,200–39,500
- Traders await breakout; a move above 41,000 could open room to 41,800, while below 39,200 risks correction
The move rattled global risk appetite and triggered diplomatic efforts from the EU, Canada, and Japan to coordinate responses.
Nikkei 225 index forecast (Source: TradingView)
Japan’s May core machinery orders dropped 0.6% month-over-month to ¥913.5 billion, beating expectations for a sharper 1.5% decline and recovering slightly from April’s steep 9.1% contraction. Still, the underlying softness in business investment added to the cautious tone. Among major decliners, Lasertec dropped 3.1%, Sanrio 4.5%, Tokyo Electron 1.9%, and SoftBank Group fell 3.1%.
Price compression below resistance
Technically, the Nikkei 225 is consolidating beneath the 41,000 resistance zone after a sharp rally from the 37,000 region earlier this quarter. Both 4-hour and daily charts show rejection candles forming under the 40,700–41,000 supply area, a level that has historically acted as a ceiling. Despite the recent dip, the index continues to respect an ascending trendline originating in April, suggesting the broader bullish structure remains intact for now.
The 4-hour chart reveals a triangle pattern forming between the rising support trendline and a descending resistance from recent highs. Price is also hovering near the 20 and 50 EMAs around 39,500, with flattening Bollinger Bands indicating tightening volatility. Traders are now watching for a breakout to resolve the range: a close above 41,000 could signal fresh upside toward 41,800, while a drop below 39,200 may invite a retest of 38,250 and potentially 37,000.
Outlook hinges on tariff and price break
With trade risks resurfacing and Japanese macro data remaining mixed, the Nikkei sits at a short-term inflection point. Momentum has slowed, but the absence of a structural breakdown suggests that the current phase is more likely a consolidation than a full reversal. If bulls defend the 39,200–39,500 zone, the path toward new highs remains open.
In prior coverage, we highlighted how the Nikkei's rally toward the 41,000 region was encountering resistance amid overheated short-term momentum. The index is now coiling under that same zone, awaiting resolution. Today’s developments underscore that while the broader trend is intact, external shocks like tariffs could dictate the next breakout direction.
