The Federal Reserve kept interest rates steady at 4.25%–4.50% post the recent policy meeting. Fed Chairman Jerome Powell suggested a wait-and-see approach amid increasing economic uncertainty.

Following the meeting, the Fed Sentiment Index slightly dipped but stayed in hawkish territory above 100. Markets see minimal likelihood of a rate cut in June, with a 70% chance of at least two cuts in 2025.

Inflation Data And Uncertainty

The annual inflation rate softened to 2.3% in April per the Consumer Price Index data. Uncertainty remains regarding the inflation impact of tariffs, as noted by Fed Vice Chair Philip Jefferson.

The US Dollar Index started the week under pressure, dropping by more than 0.8%. A US credit rating downgrade to ‘AA1’ from ‘AAA’ by Moody’s contributed to the USD’s weakness.

Monetary policy decisions rest with the Federal Reserve, affecting the US Dollar through interest rate adjustments. Quantitative Easing tends to weaken the USD, while Quantitative Tightening can strengthen it.

Fed officials, including Atlanta Fed President Raphael Bostic, are scheduled for speeches that could influence market perspectives on rate changes. The upcoming dialogues could inform currency strength positions further.

Federal Funds Rate Decision

The Federal Reserve has opted to keep the federal funds rate within the 4.25% to 4.50% corridor, holding steady after its most recent meeting. Powell expressed caution, signalling that policymakers are content to pause while incoming data clarifies the strength—or fragility—of current economic trends. This essentially signals no rush towards rate cuts unless inflation or employment data veers meaningfully from projections.

After this decision, the Fed Sentiment Index nudged downward, although it remains in hawkish territory, suggesting officials still lean toward a tighter stance unless forced otherwise. With the gauge remaining above 100, market participants should not interpret recent dovish rhetoric as an imminent policy pivot.

The inflation reading for April came in at 2.3% year-on-year, marking a gentle easing in consumer price pressures. However, we must stay alert. Jefferson pointed out that uncertainties around the price effects from future tariff policies could reverse the inflation cooling, especially if geopolitical tensions or trade disruptions intensify. This becomes particularly relevant in macro models underpinning medium-dated derivatives pricing.

The greenback has felt the weight of Moody’s downgrade, slipping over 0.8% as traders priced in the reputational impact of the US moving from a ‘AAA’ to an ‘AA1’ sovereign rating. The ramifications extend beyond mere optics. A lower credit rating affects long-term yield expectations and prompts investors to reassess USD-denominated exposures. In such conditions, positioning around currency futures could see increased volatility as market participants react to changing risk premiums.

Although the base rate hasn’t changed, the future path remains firmly in traders’ crosshairs. At present, swaps show minimal perceived odds of a policy shift in June. However, probabilities for 2025 favour at least two cuts, according to current market-implied pricing, stabilised around 70%. This suggests traders are building in medium-term relief from tighter monetary conditions but not yet hedging for a short-term easing cycle.

When it comes to making directional bets or adjusting hedging structures, one must consider the ongoing balance between Quantitative Easing and Tightening. While tightening typically supports the dollar, easing depresses it through increased money supply. Any tilt towards asset purchases or balance sheet adjustments would meaningfully influence options pricing and forward curves.

With speeches from various Fed officials, including Bostic, scheduled in the coming days, dealers should remain prepared for sudden shifts in tone. These appearances often result in immediate repricing across the rates complex, feeding directly into interest rate volatilities and short-term forex movements. Given that such remarks are not always consistent across the board, reaction across the curve could vary sharply by tenor.

In these conditions, it becomes less about anticipating the next move outright and more about preparing for a path where policy remains reactive—governed by backward-looking data and public commentary. Pacing of position changes matters here. One abrupt data release—be it an upside CPI miss or an unexpected softening in labour figures—has the capacity to cascade into wholesale re-alignment across rate structures.

From where we stand, it would be prudent to maintain flexibility in exposures tied to USD performance and interest rate volatilities, particularly in the three- to nine-month window. Avoid being pulled squarely into either extreme; pricing in a gradual shift allows better calibration of gamma and skew. The signals so far point to a Fed that’s not yet ready to declare inflation tamed, and certainly unwilling to cheapen borrowing costs without unmistakable justification.

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The AUD/USD exchange rate rose sharply to near 0.6450, attributed to US Dollar weakness. This shift follows Moody’s downgrade of the US credit rating from Aaa to Aa1, prompted by rising debt levels.

The US Dollar Index dropped to approximately 100.20, its lowest in a week. Meanwhile, US 10-year Treasury yields climbed to about 4.54%, amid concerns over US credit quality.

Dollar Weakness and Global Impact

The US Dollar was weakest against the Euro, with a percentage change of -1.07%, while being strongest against the Canadian Dollar. In Australia, attention is focused on US-China trade talk developments, important for Australian exports.

The AUD/USD remained between 0.6340 and 0.6515 for a month, lingering around the 20-day Exponential Moving Average of 0.6410. The 14-day Relative Strength Index hovered around 60.00; a break above this could signal further bullish movement.

If momentum continues, the pair may target the November 25 high of 0.6550 and resistance at 0.6600. Conversely, a decline under the March 4 low of 0.6187 could lead towards further lows.

This recent movement in AUD/USD tells us something quite direct. The fall in the US Dollar stems less from shifting sentiment in the Antipodes and more from doubts creeping back into the American fiscal outlook. Moody’s pullback on its rating, downgrading from Aaa to Aa1, was a wake-up call, grounded less in politics and more in mathematics—rising debt levels that carry long-term consequences for US borrowing costs. As a result, we’ve noticed Treasury yields creeping up, ticking higher to around 4.54%, a level that adds weight to investor caution.

Market Interpretations and Future Outlook

Meanwhile, the US Dollar Index sliding to 100.20—its weakest in a week—tells us the market isn’t taking the downgrade lightly. What’s curious is the disconnect: yields climbing while the Dollar softens. For us, this split signals dislocation, potentially short-lived but pronounced while risk assessors continue to digest the implications. The Euro surged the most against the Dollar, pulling it down by over 1%, while strength against the Canadian Dollar appears more of a by-product than a conviction trade.

Looking closer at AUD/USD, the current range-bound structure is instructive. For about a month, the pair hovered between 0.6340 and 0.6515, softening attempts at deeper bullish conviction. Hovering around the 20-day EMA near 0.6410, there’s been careful accumulation, not aggressive directional chasing. The Relative Strength Index tellingly floated around 60—above the midpoint, but not quite overbought—suggests traders aren’t leaning too far in either direction, not yet willing to throw full weight behind a trend.

What stands out now is what happens near the resistance levels. Should the price break through the recent high of 0.6550 recorded in late November, followed by a move toward 0.6600, the signal grows harder to ignore—it would imply buyers are gaining confidence in sustained USD softness. That said, if we instead witness a rejection and drop back past the March low of 0.6187, we’d likely be staring at renewed pressure in AUD and a possible sentiment shift back toward safe-haven flows.

Pending trade outcomes between the US and China aren’t just political theatre for Australia—they directly impact demand for its largest exports. Mining and energy flows are among the first to reflect shifts in Asia’s industrial output, so the consultation outcomes carry weight.

As we look ahead into future sessions, staying alert to breaks of these well-established technical levels might offer clearer direction. Between residual downside USD pressure and fresh catalysts from Asia-Pacific trade, the fluctuation boundaries in AUD/USD are being tested. We’re watching to see which side gives first.

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USD/CNH is currently trading within a range of 7.1990/7.2190. A move beyond 7.2330 could suggest that the potential for USD to decline to 7.1700 is reduced.

USD is experiencing sideways movement, with recent price actions offering no new insights. The forecasted trading range for today remains between 7.1990 and 7.2190. On the last trading day, the USD closed slightly higher by 0.07% at 7.2099, fluctuating between 7.1954 and 7.2130, indicating an absence of strong upward or downward momentum.

Negative Outlook For USD

For the next 1-3 weeks, there is a negative outlook on USD, with no substantial progress made in either direction. A breach of 7.2330 might mean the scenario of a decline to 7.1700 is less probable.

Research should be conducted before making investment decisions, as all associated risks and costs are the responsibility of the individual. The opinions presented are those of the authors and not of any organisations. No financial incentives were provided for writing, and the authors are not registered investment advisors, nor should this information be perceived as financial guidance.

The US dollar against the Chinese yuan remains caught in a narrow band, with recent trading showing little appetite from the market to commit in either direction. Price action over the past sessions has hovered primarily between 7.1990 and 7.2190—a range that’s holding firm without giving traders much reason to lean bullish or bearish. A brief push above 7.2130 was observed during the last session, but it lacked conviction and retraced swiftly. That daily performance saw a slight gain, up just 0.07%, which echoes the broader stalling we’re now experiencing.

Monitoring Key Levels

Currently, the level to keep a close eye on is 7.2330. Should that be surpassed, it might suggest that the downward pressure many have been anticipating is fading, or at least being delayed. The previously identified downside target of 7.1700 would become more unlikely if spot rates start clinging to levels above 7.2330 with persistence. As it stands, though, nothing new has yet been confirmed on this front — neither bulls nor bears are in control, and that uncertainty has bred caution across forward curves and implied volatilities.

From a medium-term perspective, the dollar continues to carry a mildly negative bias against the yuan, shaped largely by macro positioning and broader sentiment around US policy expectations. Yet this bias appears to be weakening due to the lack of decisive moves in spot pricing. For those of us working with derivatives, notably in options or futures tied to this pair, implied vols have remained relatively muted, reflecting the narrow range and traders’ hesitancy to price in large swings ahead.

As a result, hedging strategies with a defined range could find relevance here, especially those structured to benefit from ongoing stagnation in spot movement. Near-dated straddles or strangles may suffer without expansion in volatility, while traders looking for breakouts either side of 7.2190 will need to reassess their thresholds for entries once — or if — 7.2330 is challenged or rejected.

No strong catalysts have emerged to change price direction sharply, and market sentiment leans sideways, suggesting a possible continuation of this ‘wait and see’ phase. Adjusting expectations around premiums and strikes will be necessary if this inertia continues into the next fortnight. If deviation from this corridor does occur, it could offer tradeable opportunities, but until then, the prevailing ranges appear dependable enough to inform short-term strategies.

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The US Dollar (USD) against the Japanese Yen (JPY) may dip below 144.90. However, the major support level of 144.50 is not expected to be challenged. Analysts indicate that USD remains in a consolidation phase, likely within a range of 144.50 to 147.30.

In the last 24 hours, the USD was anticipated to test 144.95 but a sustained break below was not expected. After touching a low of 144.90, it rebounded to 145.62. Momentum suggests a potential drop below 144.90, but without threatening the 144.50 support. The resistance levels are identified as 145.80 and 146.30.

Usd Consolidation Phase

Over the next one to three weeks, the USD is likely to remain in a consolidation phase. Initially expected to range between 144.50 and 148.50, this range has been adjusted to 144.50 and 147.30. A clear break below 144.50 could prompt a further decline in value.

Economic data indicates mixed movements with recent Moody’s downgrade of US sovereign credit impacting currency and gold markets. The downgrade contributed to weakened USD and bullish movements in EUR/USD and GBP/USD, while gold and stock futures reacted cautiously amidst economic uncertainties domestically and in China.

What we’ve seen lately in the Dollar-Yen pairing is a retracement that didn’t stretch far enough to signal a directional shift. After a brief dip under 144.95, the Dollar bounced back off 144.90 and recovered swiftly – the sort of rebound that catches the eye but doesn’t quite upset the existing rhythm. This bounce confirmed the current pattern, where the Dollar moves in a relatively tight range. For now, price behaviour remains consistent with a consolidation, rather than a reversal or breakout.

The key level that continues to hold attention is 144.50. It hasn’t been tested in full, and unless we see a clear close beneath this level with momentum to follow, its role as support holds. Any move that comes close may invite shorter-term spikes in daily volatility, but without sustained pressure, the broader structure is unlikely to change.

Revised Range Outlook

The revised range – now pinned between 144.50 and 147.30 – suggests a slightly narrower outlook than previously expected. The decision to pull the upper boundary lower implies either a reduced upside conviction, or growing caution around resistance near 147.00. In either event, it sets a clearer framework for what should be monitored in the days ahead.

Looking beyond just the price action, the downgrade of US sovereign credit by Moody’s created waves that nudged several asset classes. The Dollar lost some of its usual support in the process, and this weakness percolated into various FX pairs. The Euro and Pound both made ground against it, while gold saw a bid on haven flows. Meanwhile, equity futures flickered with uncertainty – reactions that show how sensitive the market has become to perceived shifts in financial stability, especially when they’re tied to credit risk.

From a positioning angle, this suggests that any fresh attempt to breach 144.90 to the downside should not be viewed in isolation. If it occurs alongside deteriorating confidence in US financial instruments – for example, from additional downgrades or a disappointing fiscal reading – the Dollar might not have the same resilience seen earlier this month. However, a hold above 145.00 accompanied by a weakening Yen narrative could see it gravitate back towards 146.00, possibly higher, but not convincingly enough to escape the consolidation phase.

Resistance now lies more firmly around 145.80 and 146.30. These levels should cap most of the upside unless broader market sentiment shifts or a surprise economic release alters the expectations around rate differentials. Those trading around options or futures expiries may want to watch for any clustering near these levels, as they tend to act as magnets should implied volatility remain steady.

As we approach the next batch of economic updates, especially those tied to inflation and employment, any switching between risk-on and risk-off flows may influence Yen crosses more broadly. This could indirectly push the USD/JPY towards extremes within its current range but doesn’t offer a compelling reason yet to expect a strong break beyond 147.30 or below 144.50 unless external catalysts grow louder.

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China’s April data showed the effects of the heightened US-China trade war. Industrial production growth slowed to 6.1% year-on-year, slightly above expectations, with a monthly rise of 0.2%.

Retail sales growth dropped to 5.1% year-on-year, lower than anticipated, with monthly growth also slowing. The data indicated challenges in domestic demand, influenced by a struggling property sector and low confidence levels.

Fixed Investment Trends

Fixed investment growth decelerated to 4.0% from January to April. In the property sector, annual investment and residential sales continued to contract. Despite these trends, urban jobless rate showed a slight improvement, decreasing to 5.1%.

Future growth might rebound with the recent US-China truce, reducing bilateral tariffs. It is expected that China will cut loan prime rates by 10 basis points soon, following previous reductions. Though growth risks have increased, trade-related uncertainties persist.

The latest economic figures from April help paint a direct picture of how rising tensions between Beijing and Washington have strained domestic output and spending momentum. Industrial production edged up by a modest 0.2% over the month, clocking in at a 6.1% year-on-year pace—just above estimates, but without any sign of renewed strength. The lift likely came from narrow sectors, possibly bolstered by state-driven demand rather than any broad-based industrial pickup.

Retail performance was more concerning. Annual growth slowed abruptly to 5.1%, missing projections, and monthly gains followed a similar downward path. Lower household sentiment, partly triggered by weakness in the property market, appeared to dampen consumer activity once again. April’s retail miss reflects how domestic demand remains hampered—not only by structural weight from the property system, but also by the lingering aftereffects of disrupted confidence cycles.

Fixed asset investment slowed to 4.0% over the first four months of the year, slipping further from earlier performance. Most worrying is the real estate drag—downward pressure in both development and sale volumes continues to weigh on business activity, leaving policymakers cornered between stabilisation efforts and constrained stimulus options. Residential construction and wider real estate metrics are plainly underdelivering. Lower land sales and weaker project starts suggest the capital expenditure cycle will likely soften further unless new credit channels are opened.

Urban Employment Context

Job data held relatively firm, at least on the surface. The registered unemployment rate slipped to 5.1%, suggesting some resilience in urban employment. But beneath that, underemployment and wage stagnation remain potential threats to consumer-led recovery.

Given these pressures, market participants are watching upcoming rate decisions closely. A cut to the loan prime rate—widely expected at 10 basis points—would mark a continuation of Beijing’s monetary support stance. We’ve already seen cautious steps taken in that direction. However, with fiscal space tightening and debt sensitivities rising, the question is how long these tools can carry the weight alone.

Although the recent pause in tariff escalation points toward less friction in trade channels, volatility around export policy remains elevated. We cannot assume that bilateral de-escalation translates into immediate uplift. Instead, we need to account for a time lag between policy softening and measurable economic payoff. That means nearer-term data may still be noisy, even if forward-looking conditions improve slightly.

This is not the backdrop for aggressive positioning. Price sensitivity around rate instruments could rise as traders reassess the path of stimulus and policy recalibration. If credit easing proves deeper than expected, we may see temporary risk appetite build—but with ongoing weakness in both demand and investment, any rally could be both narrow and short-lived. We should keep our exposure flexible, especially near key data prints and central bank remarks.

Watching capital flows and interest rate curves in parallel will be key. So far, shifts have been moderate. But with export dynamics far from stabilised, and domestic levers under pressure, fixed income may begin moving on expectation rather than evidence. It would be premature to adopt directional bets based purely on this month’s numbers. Instead, the timing and communication of any further easing will matter more than the size of the cuts themselves.

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AUD/USD’s price movement is noted by FX analysts, emphasising the importance of the 0.6370 mark. If the rate breaches this level, it suggests the currency pair is in a range trading phase.

For the AUD to rise further, it needs to break and hold above 0.6515. In a previous session, the rate was within the narrow range of 0.6388/0.6436, closing at 0.6404 with minimal change.

Short Term Expectations

Recent analyses suggest the AUD is likely to trade between 0.6390 and 0.6440. Slowing upward momentum has been observed over the last week.

Separately, other currencies like EUR/USD and GBP/USD are influenced by USD’s weakness. Moody’s downgrade of the US sovereign credit rating also impacts markets.

Gold benefited from the cautious market stance, rebounding to $3,250. US stocks reacted to Moody’s US debt downgrade with a negative opening.

China’s economic slowdown is attributed to trade war uncertainty. Retail sales and fixed-asset investments are impacted, although manufacturing remains relatively resilient.

Volatility and Risks

Trading foreign exchange involves significant risks, including the potential for the total loss of investment. Individual opinions do not represent broader consensus.

We’re seeing a fairly constrained movement on the AUD/USD, with close attention being paid to 0.6370. That level seems to act as a temporary floor. If this price point fails to hold, it signals that we are not in a trending phase but rather stuck in a period of sideways movement – the market just isn’t picking a strong direction yet.

To gain some upward traction, the pair must convincingly climb past 0.6515. That hasn’t happened recently, and given the previous session’s tight range between 0.6388 and 0.6436, with a mild close at 0.6404, there’s little momentum pulling it either way. The pattern isn’t yielding any surprises at this stage.

Analysts have adjusted short-term expectations accordingly. The revised bracket now sits between 0.6390 and 0.6440. Given the loss of upward energy over the past week, that prediction seems grounded. Momentum indicators lean soft, and trend-followers might find it hard to place high-conviction bets until external triggers nudge the market out of this narrow band.

It’s worth considering the wider forces driving current prices. A softer US dollar has offered some breathing room for both the euro and sterling. That’s partly down to the recent move by Moody’s, which lowered the US’s sovereign credit rating. That particular decision sent some early ripples through bond and equity markets, with the Dow and S&P 500 opening in negative territory. Risk sentiment was clearly dented, and we saw a fairly reliable safe haven reaction as gold was bought aggressively, shooting up to $3,250.

In parallel to currency dynamics, Chinese data continues to disappoint. The lack of strength in retail spending and fixed investment points to pressure beneath the surface of the world’s second-largest economy. While factories have shown some tenacity, consumer-driven indicators aren’t as stable. The threat posed by ongoing trade uncertainty further clouds recovery prospects.

For traders managing foreign exchange exposure, volatility tied to macro headlines remains a key consideration. When market direction becomes more limited, as it has with AUD/USD, option premiums tend to decrease, but the risks aren’t gone—they’re just shifting. Timing becomes less of a directional bet and more dependent on news flow and reaction triggers.

At this stage, staying close to stop-loss levels and watching for unexpected data beats or policy remarks seems a reasonable approach. Markets haven’t committed, but they might well be waiting for cues strong enough to restore conviction.

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The Euro is predicted to trade with an upward tendency, but gains might be limited to reaching 1.1225. Over a longer term, the currency may settle in a range between 1.1100 and 1.1290 according to FX analysts Quek Ser Leang and Peter Chia.

In the 24-hour outlook, the Euro was last at 1.1190 and expected to range between 1.1145 and 1.1235. It instead dropped from 1.1219 to 1.1129 before rebounding to close at 1.1163, a decrease of 0.21%. While a mild recovery is unfolding, a push beyond 1.1225 is not anticipated due to weak momentum. Present support is at 1.1160, and falling below 1.1135 could weaken current upward pressures.

Over the next one to three weeks, the Euro may have entered a consolidation phase. It is expected to trade within the 1.1100 to 1.1290 range. This forecast remains unchanged and encompasses risks, requiring careful research before making financial decisions.

We’re observing a delicate recovery in the Euro following its recent slip, which clipped earlier gains. The currency had climbed to 1.1219, only to reverse sharply and drop to 1.1129 before stabilising at 1.1163—down nearly a quarter of a percentage point. Although there has been a slight recovery, we’re not seeing enough momentum at present for prices to convincingly push through 1.1225. Short-term indicators do point to some upside possibilities, but these appear muted by broader conditions.

Chia and Quek’s short-term range call of between 1.1145 and 1.1235 has been tested rather quickly, with the lower end already breached during the pullback. However, their wider view, forecasting a range between 1.1100 and 1.1290 over the coming weeks, remains in place. Current weakness seems likely to persist temporarily, although not deep enough to invalidate the medium-term structure. For that to change, we’d need to see a sustained drop beneath 1.1100, which at the moment seems unlikely without added pressure from rate differentials or risk sentiment.

Given the underlying momentum remains fragile, it’s worth being strict with levels. Support at 1.1160 is being challenged, and slipping under 1.1135 wouldn’t just mark a near-term dip—it could start dragging sentiment lower through technical pressure. On the other hand, any break of 1.1225 would suggest that momentum is strengthening, possibly opening space toward the top of the three-week range, though such a move currently lacks broad backing.

We’re in a period that tends to reward caution. The longer this consolidation persists, the more traders will tighten their trading bands and adjust implied volatility forecasts. That could start influencing option premiums and short-dated derivative pricing. In this kind of range-bound behaviour, delta-neutral positioning and range-bound option strategies often offer favourable risk-reward profiles.

FX options markets have not yet signalled strong directional conviction, which aligns with the current technical backdrop. We can also infer that sentiment is leaning toward patience rather than chasing moves. That doesn’t mean opportunities are absent, but they’re more likely to be found at the edges of this outlined range, rather than at midpoints where conviction remains low.

In the coming sessions, any momentum-based signals should be used with more discretion. We’ve already observed how thin order books made the Euro susceptible to abrupt reversals even in widely expected ranges. Until we see a consistent tightening of spreads and more stable price action above 1.1200, upside targets north of 1.1290 remain premature.

There’s benefit in keeping risk calibrated tightly around these reaction levels. Trends here aren’t extended, and that favours strategies that assume rotation, not breakouts. The sort of de-risking visible in adjacent asset classes suggests participants are preparing more for sideways moves than fresh rallies.

For now, stick to defined levels—risk comes from assuming breakouts that don’t follow through.

China’s economy showed resilience in April despite US tariffs. Industrial production (IP) remained steady with continued frontloading in other markets after a temporary pause in US tariffs.

Retail sales and the property market experienced a downturn in April, with weaker-than-expected figures for retail sales and urban fixed assets investment (FAI). However, month-on-month momentum held positive, and surveyed jobless rates decreased slightly. Property indicators like home prices and sales showed a decline.

Revised 2025 Gdp Growth Forecast

Considering the short-term effects of the US-China trade truce, the GDP growth forecast for China in 2025 is revised to 4.6% from 4.3%. Predictions for the second quarter of 2025 suggest a growth rate of 4.9% year-on-year, with a forecast of 4.2% in the latter half. The outlook depends on a stable trade agreement between the US and China.

An interest rate cut of 0.1%-point is expected in the fourth quarter of 2025. Projections indicate the 7-day reverse repo rate, 1Y LPR, and 5Y LPR will be at 1.30%, 2.90%, and 3.40% respectively by end-4Q25.

Industrial production in April managed to hold its ground, bolstered by early shipments to markets outside the United States. This frontloading activity came after a short pause in tariffs, which had ripple effects across key export sectors. While overall output remained stable, momentum clearly shifted from US-facing sectors to those aligned with regions unaffected by tariff pressure. That substitution effect helped cushion what might have otherwise been a sharper slowdown. Traders focusing on macro-sensitive instruments would do well to recognise this reallocation of trade flow and the knock-on effects it could have on manufacturing-linked contracts.

Retail sales, by contrast, dipped more sharply than most had pencilled in, coming in weaker than the monthly trend would suggest. The property market compounded these concerns. Prices nudged lower, and transaction activity softened, especially in tier-two and tier-three cities. Urban fixed asset investment also undershot expectations, indicating that private developers and local governments alike are still holding back. Despite these setbacks, we saw a small improvement in the national jobless rate—a modest but positive counterbalance. That low-level shift in confidence may not fully offset the drag from slowing property demand, but it prevents further slippage—for now.

Policy Expectations And Impact

The GDP growth target for next year has been adjusted upwards, from 4.3% to 4.6%, based on current assumptions of a steady trade arrangement with the United States. We’re expecting a higher print in the second quarter—around 4.9% year-on-year—before activity begins to slow again towards the back half of 2025. That said, risks remain tilted toward any abrupt change in trade policy or a resurgence of property sector weakness. With those in mind, pricing for contracts tied to high-frequency growth indicators should be more attentive to headline release timing over the coming weeks.

On the policy front, the expectation for a small interest rate cut in late 2025 reflects a blend of cautious optimism and targeted support. Projections for the 7-day reverse repo rate, along with the main 1-year and 5-year loan prime rates, carry a clear message: directional easing, but in measured steps. These levels—1.30%, 2.90%, and 3.40%, respectively—serve as reference points for the funding environment traders will be operating in through year-end. As we assess the slope of the yield curve and the pricing of near-term liquidity instruments, these rates help define the boundaries for short-dated swaps and repo-linked strategies.

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Alibaba reported non-GAAP earnings of $1.73 per ADS in the fourth quarter of fiscal 2025, surpassing estimates by 16.89%. In domestic currency, earnings reached RMB 12.52, marking a 23% year-over-year growth.

Revenues totaled $32.6 billion but fell short of expectations by 1.49%. In RMB terms, revenues jumped 7% year over year to RMB 236.5 billion.

Key Drivers

Driving the revenue increase was the core domestic e-commerce segment, Taobao and Tmall Group, alongside the growth in Cloud Intelligence and International Digital Commerce. Following the earnings release, Alibaba’s shares rose by 1.65% in pre-market trading, with a 46.2% increase year-to-date.

Taobao and Tmall Group generated RMB 101.37 billion in revenues, representing 42.9% of total earnings and a 9% increase from the prior year. The 88VIP membership saw a double-digit rise, reaching 50 million members.

China Commerce Retail and Wholesale segments experienced growth with revenues of RMB 95.6 billion and RMB 5.8 billion respectively. The International Digital Commerce Group revenues climbed 22% to RMB 33.6 billion, driven by cross-border business success.

Operating income rose to RMB 28.5 billion, representing a 92.8% year-over-year increase. Cash and cash equivalents at the end of Q4 stood at $20 billion, while short-term investments were recorded at $31.5 billion.

Mixed Signals

Alibaba’s recent earnings report paints a decidedly mixed picture, but there are clear signals that warrant a closer examination—especially when paired with the broader macro environment. While profit outpaced expectations by a healthy margin, revenue fell just shy of forecasts. That split performance needs proper weight when calibrating forward-looking exposure, particularly in leveraged positions.

Let’s start with the earnings. On an adjusted basis, the company delivered $1.73 per ADS, or RMB 12.52, which reflects a 23% increase from the same period last year. Markets tend to reward efficiency and margin lift, and we’ve seen exactly that. The operating income more than doubled, up 92.8% year-over-year to RMB 28.5 billion. That suggests stronger internal cost controls and monetisation efforts—important markers when assessing upside potential amid rising rates or FX fluctuations.

However, revenue disappointed slightly—coming in at $32.6 billion, or about RMB 236.5 billion, below what analysts were hoping for by 1.49%. The increase of 7% in domestic terms still reflects moderate growth—but that moderation, when set against high expectations, puts some pressure on top-line acceleration. Notably, the domestic e-commerce segment remains the primary driver, with Taobao and Tmall pulling in over RMB 101 billion combined, up 9% from one year ago.

Package that with a 50 million-strong 88VIP user base climbing at a double-digit rate, and it’s clear there’s customer retention in play at the high-value tier. That’s the kind of long-term consistency that strengthens pricing power. The China Commerce Retail arm complemented that momentum, while the Wholesale segment, albeit smaller, held steady. On a wider scale, international expansion is gathering pace, evidenced by the 22% climb in revenues from the cross-border commerce group.

The state of liquidity further bolsters the medium-term risk profile. With cash holdings of $20 billion and another $31.5 billion in short-term assets, there’s ample cover for investments or opportunistic buybacks. That reinforces confidence in the balance sheet—an underappreciated lever when markets turn defensive or volatility spikes.

Markets responded modestly, with shares ticking up 1.65% in early trading. Yet they’ve already gained 46.2% across the year. That cumulative rise raises questions of overextension or momentum-driven positioning. As volatility surfaces around event-driven catalysts—especially regulatory updates or macro releases—those holding leveraged exposure should reassess optionality and stress-test sensitivity across tenors.

Gross notional risk needs to be scaled according to both earnings cyclicality and cash generation strength. The underlying fundamentals shown here permit selective long set-ups, but hedging remains prudent unless broader market sentiment swings more decisively. We are taking cues from both revenue reliability and capital discipline. Combining those should help navigate thinner summer liquidity with improved strategy precision.

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Japanese stocks started the week on a cautious note as investors reacted to growing concerns about the US economy and a stronger yen. A recent US credit rating downgrade triggered safe-haven flows, raising fresh worries for Japan’s export-focused market.

Nikkei 225 dips as stronger yen and US debt concerns dampen sentiment

Japanese equities kicked off the week on a weaker note, with the Nikkei 225 index dropping 0.68% to finish at 37,498.63 on Monday.

The broader Topix index remained largely unchanged, slipping just 0.08% to close at 2,738.39. A firmer yen and growing unease surrounding the US fiscal outlook contributed to the cautious market tone.

Investor sentiment soured following Moody’s downgrade of the US sovereign credit rating late Friday, highlighting America’s swelling USD 36 trillion national debt.

The move triggered fresh concerns about capital outflows from US assets, prompting a shift towards safe-haven currencies.

As a result, the yen strengthened by 0.4%, trading at 145.05 per US dollar during the Asian session.

A stronger yen typically poses challenges for Japanese exporters, as it reduces the yen-denominated value of overseas profits.

Reflecting this, tech and semiconductor stocks faced headwinds — Advantest (6857) declined 2.85%, while Tokyo Electron (8035) fell 1.7%.

The downgrade could also complicate Donald Trump’s prospects of implementing fresh tax cuts, raising fears of deeper fiscal instability that may disrupt global capital flows.

Still, not all was bleak. Daiichi Sankyo (4568) surged by 7%, emerging as the Nikkei’s top performer and providing a measure of support.

Market breadth was mixed: around 50% of Tokyo-listed stocks ended higher, 45% declined, and 3% remained flat — suggesting a tentative investor mood.

Nikkei 225 technical analysis: Bearish momentum builds

The Nikkei 225 experienced a steady pullback after peaking at 37,970.93, closing lower at 37,388.18 in the latest session.

The index has now slipped below both the 10- and 30-period moving averages on the 15-minute chart, reinforcing a bearish bias.

This downside move was accompanied by a negative MACD crossover and expanding histogram bars, both signalling increasing selling pressure.

Although a brief rebound was observed around midday on 17 May, bullish momentum faded quickly. The index has since formed a series of lower highs and lower lows, further confirming the weakening trend.

Immediate support is now seen near the 37,300 level. A break below this could trigger additional downside.

On the upside, resistance is expected around the 37,750 to 37,800 range. If the MACD starts to flatten, a period of consolidation may follow — but until the price climbs back above the 30-period moving average, the technical bias remains bearish.

Market outlook: External risks limit upside potential

While Japanese stocks continue to draw support from solid corporate earnings and expectations of ongoing monetary easing, external pressures could weigh heavily in the near term.

Persistent concerns over the US fiscal position and the risk of renewed trade tensions remain potential headwinds.

If the yen continues to appreciate, export-reliant sectors may come under further pressure.

Investors will be watching US Treasury yields and upcoming Japanese trade figures closely for additional cues on market direction.

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