Dow Jones & Nasdaq 100 Edged Higher Ahead of the BoJ Decision and Trump-Xi Call

US Stock Futures Lift Ahead of BoJ, Trump-Xi Call

Will BoJ divergence spark another yen-fueled sell-off? The potential threat of a Yen carry trade unwind left US stock futures with modest gains in early trading on Friday, September 19.

Market euphoria over the Fed’s 25-basis-point rate cut and potential for back-to-back policy adjustments in the fourth quarter abated in early trading. Immediate focus will be on the Bank of Japan’s monetary policy decision. According to the latest Bloomberg BoJ Watchers Survey, 88% of economists expect the central bank to stand pat on monetary policy. However, uncertainty surrounds the BoJ’s fourth-quarter rate path.

Why should US stock futures traders worry about yen carry trades and the Bank of Japan?

A hawkish hold—where policymakers support an interest rate hike—could narrow US-Japan interest rate differentials in favor of the Yen, potentially sending USD/JPY sharply lower. Large USD/JPY price swings could result in margin calls, forcing investors to unwind carry trades, including leveraged US stock holdings.

In July 2024, traders faced a similar dynamic, where the Fed signaled multiple rate cuts while the BoJ diverged with a move toward policy normalization. The USD/JPY pair tumbled from 152.748 (July 31) to 139.576 (September 16) because of the carry trade unwind. The Nasdaq Composite Index fell 11% in three trading sessions before steadying.

The risk of a US government shutdown was another market headwind. Democrats have opposed a stopgap spending bill.

Markets React: US Stock Futures Edge Higher as Fed Policy Outlook Resonates

US stock futures were back on the move in morning trading despite several potential market headwinds. The Dow Jones E-mini rose 29 points, the Nasdaq 100 E-mini gained 5 points, while the S&P 500 E-mini climbed 4 points.

Market bets on the Fed cutting rates in October and a potential policy adjustment in December continued to signal a bullish longer-term outlook. Historically, US equity markets have rallied when the Fed has cut rates and the US indexes are sitting at or near all-time highs.

The Fed Effect

Despite ongoing trade disputes, the global stock markets are reaching unprecedented levels, underscoring the significance of the Fed’s policy stance on risk assets.

The Kobeissi Letter commented on recent stock market trends, stating:

“Global stock markets have reached a record $143.8 TRILLION in market cap. Since the April 2025 low, the value of world stocks has skyrocketed +$33.8 trillion, or +31%. Furthermore, global markets have added a whopping +$83.0 trillion in value, rising +137%, since the 2020 low. At the current pace, global stock market cap gains since 2020 will exceed $100 trillion by the end of 2025. As a result, world stocks will surpass $150 trillion for the first time in history.”

Will President Trump and President Xi Ink a Deal?

Later Friday, traders brace for President Trump’s phone call with Chinese President Xi Jinping. US-China tensions have escalated in recent weeks, with China banning Nvidia (NVDA) chips and the US targeting transshipments of Chinese goods through third countries. Beijing has also targeted Trump’s agricultural voting base.

CN Wire reported:

“China has not bought any US soybeans at the start of the export season for the first time since records began in 1999, signaling it is using agriculture as leverage in its trade fight with Washington. Last year, the US supplied a fifth of China’s soybean imports worth over $12 billion, but with healthy stockpiles, China is showing patience as Xi Jinping prepares to speak with Trump on Friday amid disputes over semiconductors and rare earths.”

President Xi could potentially unlock the supply of rare earth minerals and make a substantial soybean purchase in exchange for lower tariffs, a risk-on event. However, the potential scenarios could leave traders on a cautious footing. President Trump could threaten an end to the tariff truce and impose 145% levies on Chinese shipments, a risk-off event.

The Trump-Xi call is scheduled for 9 am Eastern Time.

Key Technical Levels for Dow Jones, Nasdaq 100, and S&P 500

The morning gains, following overnight record highs, reaffirmed the short-term bullish bias. However, momentum hinges on trade developments, the BoJ’s policy guidance, government shutdown risks, and Fed chatter. For traders, here are the key levels influencing market direction in the coming sessions.

Dow Jones

• Resistance: September 18 record high of 46,722 and then 47,000.
• Support: 46,500, 46,000, and then the 50-day EMA (45,093).

Nasdaq 100

• Resistance: September 18 record high of 24,816 and 25,000.
• Support: 24,500, 24,000, and the 50-day EMA (23,518).

S&P 500

• Resistance: September 18 record high of 6,720 and then 7,000.
• Support: 6,500 and the 50-day EMA (6,436).

September Outlook: BoJ, Trump-Xi Call, Capitol Hill, and the Fed in Focus

Traders should closely monitor the Bank of Japan’s forward guidance and USD/JPY trends. Later in the session, developments on Capitol Hill, the Trump-Xi call, and Fed speakers also require consideration.

These key events could extend or reverse the September rally. Follow our live coverage and consult our economic calendar.