The focus is on Nvidia this week
This week, we are focusing on the USD/JPY currency pair. Given that the prospect of a US interest rate cut has diminished, we believe that the USD could strengthen. Meanwhile, weaknesses in the Japanese economy are unlikely to increase the value of the yen. Separately, concerns over whether the Fed will cut interest rates in December have led to a decline in global stock markets. Investors are also awaiting Nvidia's quarterly report on Wednesday.
Case of the week: The yen might slide further against the US dollar
The longest shutdown of the US government has come to an end. This could help to normalise the US economy. At the same time, the probability of a rate cut from the Federal Reserve in December has decreased to around 40 per cent. Together, these factors should bolster the US dollar, while the Japanese yen remains vulnerable.
The Japanese tilt toward looser policies
The Japanese yen remains under sustained downward pressure due to a combination of policy decisions and economic factors. Firstly, the public support of Prime Minister Sanae Takaichi for prolonged loose fiscal and monetary policies signals that Japan will maintain accommodative conditions, thereby reinforcing the appeal of yen-funded carry trades. Secondly, the resolution of the US government shutdown could increase global appetite for risk, despite ongoing concerns about its potential impact on US growth.
The interest rate differential and structural factors are the long-term drivers behind yen weakness
The significant interest rate difference between Japan and the US has resulted in sustained yen weakness. If the yen falls sharply, the Bank of Japan (BOJ) may intervene to support it. However, the Bank of Japan’s loose monetary policy, combined with high interest rates in the US, ensures that capital moves towards the dollar. This makes the yen the world’s preferred funding currency, thereby sustaining its decline. Structural factors reinforce this trend: Japan’s anaemic growth, low wages and substantial government debt prevent significant tightening of monetary policy, while yen weakness benefits exporters and corporate profits, reducing the pressure for appreciation.
The latest data confirm these structural headwinds. Japan’s Q3 2025 GDP fell by 1.8% on an annualised basis, due to slowing consumer spending and weak exports. This leaves the BOJ with little reason to tighten. Overall, yen weakness in the short and long term appears likely, reflecting broader policy and market fundamentals.
The uptrend in USD/JPY remains clear on both the daily and weekly charts. The publication of the Fed's October meeting minutes on Wednesday and Japanese inflation figures for October on Thursday this week may influence expectations for monetary policy and therefore the currency pair.
USDJPY (US dollar/Japanese Yen), one-year daily chart
USDJPY (US dollar/Japanese Yen), five-year weekly chart
Macro comments
European and US stock markets ended last week on a weak note, with most of the leading indices in
the red on Friday November 14. Investors are becoming increasingly unconvinced that the Federal Reserve will further cut interest rates at its December meeting. Currently, the market is pricing in a probability of just over 42% for a 25-basis point cut, compared to 70% a week ago. Additionally, attention is turning to the high valuation of the AI-related stock sector in the US, which is having a significant impact on developments in stock markets around the world.
Nvidia, the most important company in the tech and AI sector, will be under scrutiny when it reports its quarterly results on Wednesday, November 19. Also reporting their quarterly results on Wednesday are the US companies Lowe’s Companies, Palo Alto Networks, and the TJX Companies, as well as the Chinese company Nio Inc. Meanwhile, Assa Abloy and Nokia will each host a capital markets day. The day's macroeconomic news will begin with the release of Japan's October trade balance and September machinery orders. A few hours later, the UK's Consumer Price Index (CPI) and Producer Price Index (PPI) figures for October will be released. From the Eurozone, the September trade balance, October CPI and Q3 labour costs will be presented. The US will contribute October's housing construction data, the Department of Energy's weekly oil inventory statistics, and the minutes from the Fed's policy meeting on October 29.
On Thursday, November 20, Gap, Intuit and Walmart will announce their quarterly results in the US. Also on that day, the Swedish company Thule is holding a capital markets day. Thursday's macroeconomic news from continental Europe will consist of Germany's Producer Price Index for October and Eurozone construction production figures for September. The UK will release CBI industrial trends for November, and a Eurozone household confidence indicator for October is also expected. A series of macroeconomic statistics are also scheduled for release in the US, including the Philadelphia Fed Index for November (see graph below), initial weekly jobless claims, existing home sales for October and the Kansas City Fed Index for November, as well as the US nonfarm payrolls for September.
On Friday 21 November, the macro news focus will be on the purchasing managers' indices for November from Japan, India, France, Germany, the eurozone, the UK and the US. Other releases include Japan's CPI and UK retail sales for October, a confidence indicator from the French industry for November, and the US Michigan index for November.
US Philadelphia Manufacturing Index, actual and forecast from December 2020 to November 2025
The risk has shifted to the downside. Is this an opportunity to buy?
The S&P 500 is currently under pressure, with the Moving Average Convergence Divergence (MACD) having generated a sell signal. The main factors behind this negative momentum are concerns about valuations in the technology sector and apprehension about economic data and rising interest rates. Support levels can be found at around 6,600 and at the 100-Day Moving Average (MA100), as well as near 6,500. However, interest rates are beginning to ease and most MAG7 stocks are at or approaching key support levels. Consequently, this may present an opportunity for the brave to consider buying.
S&P 500 (in USD), one-year daily chart
S&P 500 (in USD), weekly five-year chart
Conversely, the NASDAQ-100 is currently trading below the support level of 24,740. Having generated a sell signal, the MACD indicates a clear risk of further decline towards levels between 24,000 and 24,220. Continued weakness in the tech sector would also put pressure on the S&P 500. However, keep an eye on MAG7 for a potential rebound.
NASDAQ-100 (in USD), one-year daily chart
NASDAQ-100 (in USD), weekly five-year chart
The German DAX is currently trading below its 200-Day Moving Average, approaching a support level just above 23,000. The MACD indicates negative momentum, while the Relative Strength Index (RSI) is approaching oversold territory, albeit with some remaining room. If the index falls below 23,000, the next support levels are 22,825 and 22,300.
DAX (in EUR), one-year daily chart
DAX (in EUR), weekly five-year chart
Meanwhile, the OMXS30 in Sweden is currently trading below both its 50-day moving average and the 2,700 level. The next support levels are 2,650 and 2,620, followed by the 200-Day Moving Average, which is currently at 2,595.
OMX30 (in SEK), one-year daily chart
OMX30 (in SEK), weekly five-year chart
The full name for abbreviations used in the previous text:
EMA 9: 9-day Exponential Moving Average
Fibonacci: There are several Fibonacci lines used in technical analysis. Fibonacci numbers are a sequence in which each successive number is the sum of the two previous numbers.
MA20: 20-day Moving Average
MA50: 50-day Moving Average
MA100: 100-day Moving Average
MA200: 200-day Moving Average
MACD: Moving Average Convergence Divergence
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