Decision time for Nikkei as price action compressesJapan 225 CFDFOREXCOM:JP225FOREXcomWe’re getting close to decision time when it comes to the Nikkei, with price action becoming compressed following a period of weakness. The setup marginally favours an eventual resumption of the prior bearish trend, but I’m waiting for confirmation one way or another through a break of the structure before making any decisions. A clean break of uptrend support running from the lows hit on Monday would put a retest of 62,715 on the cards, with the swing low set in early August at 62,058 and another swing low set in late July at 60,433 other potential targets if we were to see an extension of the prevailing bearish trend. Of course, if we saw a break above downtrend resistance running from the highs set in early September that sticks, 64,000 would be the first hurdle for bulls. A push above there may encourage more buyers to join in, putting 64,915, 65,355 and 65,750 in play initially. Momentum marginally favours the bears, with RSI (14) sitting beneath 50, while MACD remains negative and is starting to converge on the signal line. One factor that partially offsets the bearish technical bias is the reversal underway in USD/JPY. A weaker yen has historically tended to be supportive for the Nikkei given the index’s large weighting of exporters and offshore earners, potentially providing some support even if the technical structure remains vulnerable. At this stage, the setup marginally favours the bears, but realistically a definitive price break from the structure would be far more informative on potential near-term directional risks. Good luck! DS