The Morale Level is an important mechanic in Xenoblade Chronicles X. It is also known as the Soul Stage in the Japanese version. This mechanic is linked to the Soul Voice mechanic. It is a three bars gauge above the arts palette with the HP and the TP gauges. One bar can be filled whenever a Soul Challenge is successful. The Morale Level is somewhat similar to the Tension mechanic in Xenoblade Chronicles.
The Morale Level has two main purposes: first, the more bars are filled the higher the chance of triggering a Soul Challenge. Second, some arts rely on the Morale to get additional effects and the higher the Morale the greater the effect.