Insights 
VT 
Key Points:
- Nikkei 225 fell 0.78% to 39,574.65 after hitting a low of 39,411.65.
- Tech stocks dragged Japanese equities; dollar remains near multi-year lows on Fed cut bets.
Japanese equities came under pressure on Wednesday as traders weighed cross-border friction, fading tech momentum, and a murky Federal Reserve outlook. The Nikkei 225 declined 0.78% to 39,574.65 after touching a low of 39,411.65 earlier in the session. The index opened at 39,510.65 but failed to hold gains, weighed down by broad selling in technology names.
Trump Deadline, Tech Rout and U.S. Fiscal Fears Fuel Risk Aversion
President Donald Trump has doubled down on his July 9 deadline for new tariff agreements, stating he will not extend talks. While he voiced optimism for a deal with India, he expressed renewed scepticism toward Japan—Japan’s largest export partner.
The looming deadline has rattled Asia-Pacific markets, especially tech-heavy indices like Japan’s Nikkei, Taiwan’s TAIEX, and South Korea’s KOSPI.
The pullback comes as U.S. tech firms also corrected after a strong June rally. A broader risk-off shift has hit semiconductors and hardware names in particular.
Meanwhile, in the U.S., traders remain cautious despite signs of labour market resilience. Job openings rose in May, putting Thursday’s non-farm payrolls (NFP) report into sharper focus. Traders are now pricing in 64 basis points of cuts by the Fed this year, with only a 21% probability of a July move. The Fed, led by Powell, continues to stress a “wait and see” approach regarding tariff-driven inflation.
Adding fuel to trader anxiety, Trump’s massive tax-and-spending bill—dubbed the “One Big Beautiful Bill”—passed the Senate narrowly and now heads to the House. If approved, it will add $3.3 trillion to U.S. national debt. The long-term fiscal outlook has cast a shadow over U.S. assets, driving foreign investors toward alternatives.
Technical Analysis
The Nikkei 225 has been in a clear downtrend since peaking near the 40,000 mark earlier in the week, with the price slipping to a low of 39,411.65. The 5, 10, and 30-period moving averages remain sloped downward and are currently acting as dynamic resistance. Despite minor intraday bounces, momentum has been mostly bearish, as reflected in the MACD staying below the zero line for most of the session.
Picture: Nikkei eyes recovery after steep fall, as seen on the VT Markets app
However, signs of stabilisation are starting to emerge. Price action is forming a short-term base around the 39,400 zone, which aligns with a MACD crossover to the upside and a flattening of the histogram. A clean move above 39,600–39,620 (near-term resistance) could open the door for a relief rally, with 39,850–39,900 as the next upside target. Conversely, a break back below 39,400 would confirm bearish continuation, exposing deeper support at 39,200.
If the July 9 tariff deadline passes without resolution, or if NFP surprises to the upside and stalls Fed cut expectations, Nikkei may remain range-bound or face additional selling. However, dovish surprises or a weaker yen could provide temporary support.
