4 min readThe Nikkei index has gained nearly 12% in February and broke above 59,000 for the first time in history this week. The rally has been driven by PM Takaichi’s dovish BOJ board nominations, fading rate hike expectations, and a broader rotation out of US equities into international markets.
However, BOJ board member Takata pushed back on Thursday, warning of an “inflation overshoot” risk, while Governor Ueda put the March and April meetings on the table for potential rate adjustments.
Let’s look at the charts.
Daily chart analysis
The Nikkei has been trading within an uptrend and ascending linear regression channel since April 2025 and has now pushed into the upper two standard deviation band, an area where moves tend to become overextended.
Two signals are worth watching:
- Volume is declining as price pushes into new highs, suggesting participation behind the breakout could be thinning
- RSI is printing a bearish divergence, with lower highs on the indicator while price makes higher highs
This does not mean a reversal is imminent. Divergences can persist for extended periods, and nothing is confirmed until we see a break of structure on price. But it is worth keeping in mind as we move to the lower time frame.
4-hour chart analysis
The 4-hour chart tells a more bullish story. Price broke above the previous all-time high zone around 58,000-58,400 and has pulled back to retest it cleanly. This is a textbook break-and-retest, with old resistance now acting as support.
The pullback found buyers right at the 50% Fibonacci retracement of the latest up-swing, which also lines up with the 20 EMA on this time frame. That confluence strengthens the case for this level potentially holding.
Despite the daily chart warnings, the bearish divergence does not appear to be confirming on the lower time frame. The trend remains firmly bullish with strong momentum behind it.
Key levels to watch:
- Upside targets: -0.236 Fib extension near 60,700, -0.382 near 61,200, and the -0.618 to -0.702 zone between 62,000 and 62,400
- Support: 58,000-58,500 confluence zone (previous ATH + 50% Fib + 20 EMA). A break below that puts the 0.618 Fib near 57,800 and the 50 EMA around 57,900 in focus
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