Dow Jones & Nasdaq 100 Weaken in Asia as Traders Brace for US Data

Risk aversion swept across markets during the Asian session on Tuesday, November 18. Traders braced for crucial US economic data amid sliding bets on a December Fed rate cut. US stock futures extended their overnight losses, while the Nikkei 225 and the Hang Seng Index dropped 1.77% and 1.23%, respectively.

The release of delayed US economic reports from the government shutdown could materially impact the Fed rate path. FOMC members have recently downplayed the chances of a December rate cut despite a cooling labor market, citing inflationary pressures.

Yen in Focus Ahead of Takaichi–Ueda Meeting

Meanwhile, the Japanese yen remained in focus ahead of a highly anticipated first meeting between Prime Minister Takaichi and Bank of Japan Governor Kazuo Ueda. The meeting will reportedly take place at 0630 GMT, with the BoJ’s policy outlook and the effects of yen weakness on the economy likely to be the talking points.

FX Intervention Concerns as USD/JPY Hits Nine-Month High

Japanese Finance Minister Katayama reiterated her concerns about recent FX movements in the Asian session. USD/JPY climbed to a nine-month high of 155.377 on Tuesday, November 18, raising the prospect of yen intervention.

This mirrors the previous intervention episodes, in October and early November, which capped USD/JPY gains.

Policy Divide Could Influence Yen Trends and Carry Trades

Crucially, the outcome of Prime Minister Takaichi and BoJ Governor Ueda’s meeting could influence USD/JPY price trends and yen carry trade flows. Takaichi’s ultra-loose monetary policy stance clashes with Governor Ueda’s recent signals of a potential rate hike as early as December.

Yen Weakness Accelerates Carry Trade Momentum

Notably, USD/JPY has soared 4.98% since Takaichi won the Liberal Democratic Party Election race and became Japan’s first woman prime minister. Fading bets on a December BoJ rate hike sent USD/JPY higher, fueling yen carry trades into risk assets such as US equity futures. Traders will need to ask whether political pressures can override Governor Ueda’s earlier signals. Increased pressure on the BoJ to maintain interest rates at 0.5% could boost risk appetite.

US Stock Futures: Jobs Data and the Fed in Focus

Futures trended lower during the Asian session after the previous day’s sell-off. The Dow Jones E-mini fell 6 points, the Nasdaq 100 E-mini declined 42 points, while the S&P 500 E-mini dropped 5 points.

Later on Tuesday, US ADP employment data and FOMC members’ speeches will influence sentiment. A sharp fall in weekly employment could raise stagflation risks, weighing on US stock futures. The ADP report will be a prelude to the delayed US Jobs report, due out on Thursday, November 20.

According to the CME FedWatch Tool, the probability of a Fed December rate cut has fallen from 62.4% on November 10 to 42.9% on November 17, and down sharply from 93.7% on October 17.

However, traders should monitor remarks from Fed speakers. Growing calls to delay further rate cuts to tackle elevated inflation would likely overshadow the ADP data and weigh on demand for US equity futures.

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

After Monday’s sell-off and Tuesday’s early losses, US stock futures traded below their 50-day EMA, signaling a bearish near-term bias.

Near-term trends will hinge on upcoming US data, Fed commentary, and earnings. Key levels to monitor include:

Dow Jones

• Resistance: 50-day EMA (46,756), 47,000, 47,500, and the November 12 record high of 48,528.
• Support: 46,500, then 46,000.

Nasdaq 100

• Resistance: the 50-day EMA (24,987), 25,500, 26,000, then the October 30 record high of 26,399.
• Support: 24,750, then 24,500.

S&P 500

• Resistance: the 50-day EMA (6,718), October 30 record high of 6,954, then 7,000.
• Support: 6,500, and then 6,250.

Market Outlook: US Jobs Data and Fed Signals Set the Tone

Markets face a decisive test as US economic data and Fed speeches could fuel market volatility. Incoming US jobs data could signal a sharp cooling in labor market conditions, potentially raising bets on a December Fed rate cut. However, inflation figures will likely be key, given the Fed’s increased focus on consumer price trends.

Meanwhile, concerns about AI stock valuations could continue pressuring tech stocks ahead of Nvidia’s earnings on Wednesday, November 19.

Given these competing market forces, US stock futures are likely to continue experiencing volatility through the week.

Follow our live coverage and consult the economic calendar for real-time market updates.