Nikkei 225: Plummeted towards a key inflection support zone at 49,370/48,450 for potential bullish reversal

• Nikkei 225 correction: The index fell 6.6% from its record high of 52,664, testing a key support zone at 49,370/48,450 that may trigger a short-term bullish reversal.
• Macro resilience: Japan’s Citigroup Economic Surprise Index rose to 16.8, indicating continued economic outperformance and reinforcing long-term bullish fundamentals.
• Technical setup: Oversold RSI and a bullish hammer candlestick near the 20-day moving average signal potential bullish momentum.

This is a follow-up analysis and timely update of our prior report, “Nikkei 225: Bullish trend remains intact for another potential all-time high of 50,860/51,030”, published on 24 October 2025.

The Japan 225 CFD Index (a proxy of the Nikkei 225) has staged the expected rally and surpassed the highlighted short-term resistance zone of 50,860/51,030. It printed a new record peak of 52,664 on Tuesday, 5 November 2025, before it tumbled by 6.6% to print a current intraday low of 49,099 on Wednesday, 6 November 2025, at the time of writing.

Bearish animal spirits in the US stock market, driven by stretched valuations in several major US stocks with an Artificial Intelligence (AI) theme, such as Palantir Technologies and Advanced Micro Devices, triggered a negative feedback loop in the Japanese stock market despite sound fundamentals, and an announcement made on Tuesday, 4 November, by Japanese Prime Minister Takaichi that her administration will roll out a new proactive growth strategy by next summer.

The Citigroup Economic Surprise Index (ESI) for Japan has remained above the zero line since July 2025, indicating that Japan’s economic data continues to outperform market expectations. The ESI measures the gap between actual economic results and consensus forecasts, with positive readings signalling stronger-than-expected performance.

Recently, Japan’s ESI climbed to 16.8 on Friday, 31 October, up from 13.2 on 28 October, a positive trend that reinforces the ongoing medium- and long-term uptrend in the Nikkei 225 (see Fig. 1).

Next up, we will focus on the short-term (1 to 3 days) trajectory, key elements, and key levels to watch on the Japan 225 CFD Index from a technical analysis/momentum perspective.

Bullish bias with 49,370 as key short-term pivotal support, and a clearance above 50,090 increases the probability of a minor bullish reversal towards the next intermediate resistances at 51,090 and 51,730 in the first step (see Fig. 2).

• The price action of the Japan 225 CFD Index (a proxy of the Nikkei 225 futures) has formed an hourly bullish “Hammer” candlestick pattern after a retest on its upward-sloping 20-day moving average.
• The hourly RSI momentum indicator has reached a prior extreme oversold level of 13.9 seen on 10 October 2025, which led to the start of the prior bullish impulsive up move sequence that rallied by 16.6% (high to low) from the 10 October 2025 low to the 4 November 2025 current all-time high of 52,664.

Failure to hold at the 49,370 key short-term support invalidates the bullish reversal scenario on the Japan 225 CFD Index to trigger a deeper corrective decline towards the 48,450 key medium-term pivotal support.