Nikkei 225 Forecast: Oil Rebound Triggers Pullback After 67,000 Target

Nikkei 225 corrects lower after hitting the target of 67,000 on profit taking. The index hit 66,499, which is near the target of 67,000, and started to correct lower to find the next support. But the index is still better than most of Asian markets. The drop in the index was slower than in Hong Kong, South Korea, Australia and China. This indicates a relative strength of the Japanese stocks. But complete confidence has not been achieved in the market due to a lack of clarity in negotiations with the United States and the instability of the ceasefire.

The main risk in Nikkei 225 comes from the rising oil prices. WTI oil and Brent oil rebound from the support zone, which pressures the Nikkei 225 from the resistance area. The increase in oil prices put pressure on Japan’s corporations’ margins and put inflationary pressure. This is bad news for the transport, manufacturing and consumer stocks.

The Dow Jones and S&P 500 also hit record highs and continue to show strong bullish momentum. This surge also supports the Japanese equities. Moreover, sentiment in export and technology stocks could benefit from strong U.S. markets. But Nikkei 225 may struggle at the record level due to profit taking at the resistance area.

Oil Prices Pressure Nikkei 225 Near Record Highs

The chart below shows that the Nikkei 225 trades inversely to WTI oil prices after the U.S.-Iran war. When oil prices peak and continue to drop, the Nikkei 225 follows with strong surge. However, when WTI prices produce a bottom and start to rebound, the Nikkei 225 corrects from record highs.

The latest correction in Nikkei 225 from 66,499 is a similar case as WTI crude prices are rebounding from the $89 support.

Nikkei 225 Technical Analysis: Bearish Hammer Signals Short-Term Correction

The daily chart of the Nikkei 225 shows that the index has formed a bearish hammer candle after reaching a high at 66,499. This reversal candle indicates short term profit-taking and suggests a correction. The immediate support remains at 63,800, which was the high of 8 May 2026. A break below 63,800 will open the door for further downside toward the 60,000 area. But this correction will likely be considered another buying opportunity to take the index to higher levels.

Based on the recent strength from the 50,000 level, it is likely that the index will remain above 63,800 and consolidate between 63,000 and 67,000 before the next advance. The strong bullish price structure in the Nikkei is also evident on the 4-hour chart. The chart shows the formation of a cup pattern above the 50,000 level, followed by a V-shaped recovery above the 58,300 level.

This bullish price action and the price breakout above 63,800 suggest strong bullish momentum for the next few weeks. Therefore, any correction in the index will likely offer a fresh opportunity for the next rally.

The strong correction in the Nikkei 225 from the 66,499 level is due to strong resistance from the ascending channel. This channel has been discussed during the past few weeks. The formation of a bearish hammer candle at the 67,000 level indicates a correction for the next few sessions toward the 60,000 to 62,000 area. Once this correction is over, the Nikkei 225 will likely find the next rally toward the 70,000 level.

Bottom Line

The Nikkei 225 corrects from the target of 67,000, but the trend remains positive. This correction began at  66,499 as traders started to take profits around the resistance. The primary short term risk continues to be higher oil prices as energy costs can strain corporate margins. The markets in the United States are also providing sentiment support for export and technology stocks. A break below 63,800 could push back towards 60,000 to 62,000. But the overall trend remains positive. The next target for the Nikkei 225 will likely be the 70,000 level once this correction is over.