Nikkei 225 Analysis: Index Catches Its Breath After Strong Rally

In this comprehensive analysis, Ultima Markets brings you an insightful breakdown of the Nikkei 225 for August 5, 2025.

Technical Analysis of Nikkei 225

Nikkei 225 Daily Chart Insights

• Bullish Sentiment: The index is presently undergoing a corrective retracement or consolidation period following its peak near new highs in mid-July 2025. With the Stochastic oscillator positioned in neutral territory and trending downward, this sideways action or modest additional decline may persist before the next possible upward movement emerges.
• Key support area: A break and close below the immediate support cluster of 39,775 and the purple moving average would indicate that a deeper correction is underway. In this scenario, the price would likely target the next major support level at the black moving average around 38,770. A failure to hold this level would put the current bullish trend in jeopardy.

Nikkei 225 2-hour Chart Analysis

• Neutral to cautiously bullish: The index is currently positioned directly at the long-term (green) moving average, which is providing support, while facing resistance from the medium-term (black) moving average above. This compression between two critical moving averages indicates that a significant directional breakout is likely approaching. The Stochastic oscillator has reached overbought levels (>80), signaling that the current upward momentum may be waning and could result in a temporary consolidation or shallow correction before any potential continuation higher.
• Breakout scenarios: A sustained breakout and close above the black moving average (~40,700) would signal the first bullish move, potentially paving the way for a retest of major resistance at 41,375. Conversely, failure to hold the current support at the green moving average (~40,370) would be an early warning. A confirmed breakdown would be triggered by a break and close below the key support level at 39,740.

Nikkei 225 Pivot Indicator

• The index is currently finding tentative support at the medium-term (black) moving average. The Stochastic oscillator has plunged into the oversold region (<20), which suggests that the immediate selling pressure might be overextended and could lead to a bounce or a period of consolidation before the next directional move. The key battle is now between the buyers trying to defend the recent uptrend at the black moving average and sellers pushing down from the recent high.
• Bearish Breakdown: A decisive close beneath the immediate support at the black moving average (~40,400) would reinforce the bearish scenario. A confirmed breach below the key support level at 40,300 would probably initiate a decline toward the crucial support zone at 40,190, with potential for further downside.
• Bullish Reversal: For a bullish scenario to unfold, the price must hold support at 40,400 and rebound above the purple moving average (~40,520). A decisive breakout and close above the key resistance zone at 40,650 would negate recent bearish pressure and confirm the continuation of the recovery rally.

How to Navigate the Forex Market with Ultima Markets

To navigate the complex world of trading successfully, it’s imperative to stay informed and make data-driven decisions. Ultima Markets remains dedicated to providing you with valuable insights to empower your financial journey. For personalized guidance tailored to your specific financial situation, please do not hesitate to contact Ultima Markets.

Join Ultima Markets today and access a comprehensive trading ecosystem equipped with the tools and knowledge needed to thrive in the financial markets. Stay tuned for more updates and analyses from our team of experts at Ultima Markets.

—–

Legal Documents

Trading leveraged derivative products carries a high level of risk and may not be suitable for all investors. Leverage can magnify both gains and losses, potentially resulting in rapid and substantial capital loss. Before trading, carefully assess your investment objectives, level of experience, and risk tolerance. If you are uncertain, seek advice from a licensed financial adviser. Leveraged products are not intended for inexperienced investors who do not fully understand the risks or who are unable to bear the possibility of significant losses.

Copyright © 2025 Ultima Markets Ltd. All rights reserved.

Disclaimer

Comments, news, research, analysis, price, and all information contained in the article only serve as general information for readers and do not suggest any advice. Ultima Markets has taken reasonable measures to provide up-to-date information, but cannot guarantee accuracy, and may modify without notice. Ultima Markets will not be responsible for any loss incurred due to the application of the information provided.