Nikkei 225 Technical: Start of new bullish impulsive up move as Japan’s wages tick higher

[Redator]

The price actions of the Japan 225 CFD Index (a proxy for the Nikkei 225 futures) have staged a recent decline of -5.5% from its intraday high of 42,084 on 24 July 2025 (around 1% away from its all-time high of 42,513, printed in July 2024) to hit a low of 39,980 on 1 August 2025.

Right now, we will examine whether the Japan 225 CFD has hit an inflection point or will the corrective decline from the 24 July high will extend further to the downside from a macro and technical analysis perspective.

Rising Japanese wages should boost consumer confidence

Fig. 1: Japan core-core CPI, average cash earnings (wages) & consumer confidence long-term trends (Source: MacroMicro)

Japan’s nominal wages continued to increase steadily, as they rose by 2.5% y/y in June, the fastest pace in four months (see Fig. 1).

When adjusted for inflation, real wages declined by 1.3% but the contraction is less than May’s decline of 2.6% which suggests June’s increase in nominal wages is catching up with the rise of core-core CPI inflation rate in Japan.

In addition, major Japanese firms agreed to wage hikes averaging over 5% during this year’s spring negotiations, which in turn is likely to push up the growth of real wages back into positive territory in the next wage dataset release in the July-August period.

A sustained rise in wage growth could boost consumer confidence, potentially creating a positive feedback loop that lifts Japanese equities and reinforces the medium-term bullish trend of the Nikkei 225.

Fig. 2: Japan 225 CFD Index minor trend as of 6 Aug 2025 (Source: TradingView)

Preferred trend bias (1-3 days)

The one-week minor corrective decline of the Japan 225 CFD Index (a proxy for the Nikkei 225 futures) from 24 July 2025 high to 1 August 2025 low is likely to have reached an exhaustion/inflection point where the next move may be skewed towards the bulls.

Bullish bias above 40,130 key short-term pivotal support for potential recovery towards the next intermediate resistances at 41,285, 41,610, and 41,975/42,084 (see Fig. 2).

Key elements

• The -5.5% minor corrective decline of the Japan 225 CFD Index has stalled right at the medium-term ascending trendline support in place since 23 May 2025 low and the 61.8% Fibonacci retracement of prior bullish impulsive up move from 17 July 2025 low to 24 July 2025 high.
• Its price actions have traded back up above the 20-day moving average since Monday, 4 August.
• The hourly RSI momentum indicator has continued to inch higher along a parallel ascending support and has not reached its overbought region (above 70). These observations suggest a build-up in bullish momentum, at least in the short term.

Alternative trend bias (1 to 3 days)

A break below 40,130 invalidates the bullish scenario for an extension of the minor corrective decline towards the next supports at 39,740 and 39,455 (also the 50-day moving average).

Opinions are the authors'; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. The provided publication is for informational and educational purposes only.
If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please refer to the MarketPulse Terms of Use.
Visit https://www.marketpulse.com/ to find out more about the beat of the global markets.
© 2025 OANDA Business Information & Services Inc.