Dow Jones & Nasdaq 100 Forecasts: Hawkish BoJ Hits US Futures in Asia

US stock futures retreated early in the Asian session on Monday, December 1. A hawkish Bank of Japan Governor Kazuo Ueda, boosted demand for the Japanese yen, increasing the risk of a yen carry trade unwind. USD/JPY fell 0.41% to 155.483 in morning trading, sending the Nikkei 225 down 1.68% to 49,407.

Chinese economic indicators added to the bearish sentiment as PMI data indicated a contraction across the manufacturing and service sectors.

In my view, rising risks of a yen carry trade unwind and slowing Chinese economic momentum set the stage for a short-term pullback across US equity futures.

Below, I’ll outline the key market drivers, the medium-term outlook, and the key technical levels traders should watch.

Bank of Japan Governor Ueda Sends Hawkish Signals

Bank of Japan Governor Ueda sent the most hawkish comments yet, signaling a December rate hike. The BoJ Governor cited rising wages, diminishing tariff risks, and FX sensitivity as key justifications for tighter monetary policy. His comments sent USD/JPY lower, triggering jitters over a yen carry trade unwind.

Crucially, rising bets on a December BoJ rate hike clash with expectations of a December Fed rate cut, setting the stage for a USD/JPY pullback. Typically, sharp drops in USD/JPY trigger margin calls, leading to traders exiting risk assets to repay low yen-denominated interest rate loans.

For context, the Nasdaq 100 E-mini Futures tumbled from 19,648 on July 31, 2024, to 17,351 on August 5, 2024, after the BoJ cut purchases of Japanese Government Bonds (JGBs) and raised interest rates. USD/JPY slid from 153.889 to 141.684 after the July 2024 monetary policy decision, triggering the carry trade unwind.

Fast forward to December 2025, and a USD/JPY break below 140 may trigger an unwind. However, long yen positions outweighing short positions would limit the effect of a weaker USD/JPY in the 150-140 range on markets.

Chinese Economic Indicators Flash Red

Bank of Japan Governor Ueda’s comments coincided with Chinese manufacturing sector PMI data, which signaled a loss of economic momentum. The RatingDog China General Manufacturing PMI fell from 50.6 in October to 49.9 in November, indicating a moderate sector contraction. Notably, new order growth slowed, and firms reduced staffing levels to manage costs.

However, one bright spot from the November survey suggested a potential rebound in sector activity. According to the November survey, new export orders increased at the fastest pace in eight months, indicating a pickup in external demand.

The RatingDog survey came after the NBS PMI reports on Sunday, November 30. Notably, the NBS Non-Manufacturing PMI fell from 50.1 in October to 49.5 in November, dropping below the 50 neutral level for the first time since 2022.

The drop in services sector activity indicated weakening domestic demand, pressuring Beijing to roll out new subsidies to boost consumption.

Expectations of fresh stimulus measures aimed at bolstering domestic demand would likely raise demand for risk assets. However, the Fed and the BoJ’s monetary policy decisions and USD/JPY trends will remain key in the week.

Given these dynamics, the near-term outlook appears bearish.

US ISM Manufacturing PMI and Fed Speakers in Focus

Futures reversed their gains from Friday, November 28, during the Asian session. The Dow Jones E-mini fell 201 points, the Nasdaq 100 E-mini declined 209 points, while the S&P 500 E-mini dropped 42 points.

Later on Monday, ISM Manufacturing PMI data and Fed speakers will likely influence risk sentiment. Economists forecast the ISM Manufacturing PMI to fall from 48.7 in October to 48.6 in November. A sharper drop would support a more dovish Fed rate path.

Additionally, growing calls from FOMC members for a December Fed rate cut would likely cement bets on a December cut. While the rising risk of a yen carry trade unwind weighed on sentiment, a cautious Fed policy outlook and a single BoJ rate hike would likely boost demand for risk assets.

However, traders will likely need clear guidance from the December press conferences. Market caution would support a bearish short-term (1-3 week), but more bullish medium-term (3-5 week) outlook.

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

Despite the morning losses, the Dow Jones E-mini, the Nasdaq 100 E-mini, and the S&P 500 E-mini remained above their 50-day and 200-day EMAs, signaling a bullish bias. However, fundamentals have started to shift from the technical trend, supporting a bearish short-term outlook.

Near-term trends will hinge on BoJ and Fed speeches, US data, and USD/JPY price trends. Key levels to monitor include:

Dow Jones

• Resistance: 47,750, 48,000, and the November 12 record high of 48,528.
• Support: 47,500, 47,000, the 50-day EMA (46,785), 46,000, and then the November 21 low of 45,779.

Nasdaq 100

• Resistance: 25,000, 25,500, 26,000, and then the October 30 record high of 26,399.
• Support: the 50-day EMA (24,968), 24,500, and then 24,000.

S&P 500

• Resistance: the October 30 record high of 6,954, and then 7,000.
• Support: the 50-day EMA (6,723), 6,500, and then 6,250.

Bearish Near-Term Outlook, But Bullish Medium-Term Outlook Intact

In my view, early market trends on December 1 underscored the influence of BoJ and Fed policy on risk appetite. However, upside risks that challenge the bearish short-term outlook include:

• Long yen positions outweigh short positions, limiting the effect of a weaker USD/JPY on risk assets.
• Soft US jobs data.
• Sticky US inflation.
• Cautious Fed rate cut signals would suggest low recession risk, supporting risk sentiment.

Conclusion: Medium-Term Outlook Cautiously Bullish Despite Short-Term Challenges

To summarize, rising bets on a BoJ rate hike and a Fed rate cut increase the risk of a yen carry trade unwind.

However, larger yen long versus short positions would limit the impact of a BoJ rate hike on yen carry trades and sentiment. Key US economic data will provide insights into the US economy. A cautious Fed rate cut to bolster the labor market, coupled with Fed confidence in avoiding a recession, would support a bullish medium-term outlook.

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