China Rate Cut Spurs Equity Market to Rally

• Soft U.S. job data hindered the dollar strength last night and bolstered Wall Street.

• Gold is Poised at an all-time high amid the weakening dollars strength.

Market Summary

The Chinese equity market has emerged as the standout asset class in the financial world, with the China A50 index posting its largest weekly gain in a decade and the Hang Seng Index (HK50) rising by over 12% this week. The market rally has been driven by ongoing economic stimulus measures from the Chinese government, which have bolstered confidence and spread momentum to global markets, including Wall Street, where stocks extended their bullish rally in the last session.

In the U.S., GDP data released yesterday met market expectations, while a rise in continuous jobless claims points to further softening in the labour market, increasing the likelihood of a larger Fed rate cut in the near term. Today's focus is on the U.S. PCE reading and Fed Chair Jerome Powell's speech, which are expected to provide fresh insights on the strength of the U.S. dollar.

In the commodity market, gold is nearing its next psychological resistance at $2,700, while oil prices remain under pressure amid expectations of increased supply from producers like Saudi Arabia and Libya.

In the crypto market, Bitcoin (BTC) has broken above its previous high, buoyed by improved risk appetite. The crypto fear and greed index has surged to its highest level since early August, signalling heightened optimism in the market.

Current rate hike bets on 7th November Fed interest rate decision:

Source: CME Fedwatch Tool

-50 bps (32%) VS -25 bps (68%)

Market Movements

DOLLAR_INDX, H4

The Dollar Index, which tracks the US dollar against a basket of six major currencies, rebounded following better-than-expected US economic reports. The US Gross Domestic Product (GDP) surged from the previous reading of 1.6% to 3.0%, in line with market expectations. Additionally, Durable Goods Orders and Initial Jobless Claims both exceeded forecasts, with Durable Goods posting -2.8% and Jobless Claims registering at 224K. These stronger-than-anticipated reports supported the dollar's upward trajectory. However, uncertainties remain as investors look ahead to the US Core PCE Price Index, a key inflation gauge, which could influence the dollar's direction.

The Dollar Index is trading higher following the prior rebound from the support level. However, MACD has illustrated diminishing bullish momentum, while RSI is at 48, suggesting the index might experience technical correction since the RSI stays below the midline.

Resistance level: 101.80, 102.35

Support level: 100.45, 99.70

XAU/USD, H4

Gold prices experienced significant volatility, initially surging after breaking through a key resistance level. However, the rally was short-lived as better-than-expected US economic data prompted a dollar rebound, which in turn pressured gold prices downward. As the market moves forward, investors are focusing on the US Core PCE Price Index to assess the future trajectory of gold.

Gold prices are trading lower while currently testing the support level. MACD has illustrated increasing bearish momentum, while RSI is at 52, suggesting the commodity might extend its losses after breakout since the RSI retreated sharply from overbought territory.

Resistance level: 2700.00, 2740.00

Support level: 2665.00, 2640.00

GBP/USD，H4

The Pound Sterling has formed a double-top price pattern, signalling potential resistance and a slowdown in its recent bullish momentum. This is further supported by weakening momentum indicators, suggesting that the pair may face downward pressure soon. Meanwhile, the U.S. dollar is struggling after disappointing job data, with continuous jobless claims rising, indicating a softening labour market. This has cast doubt on the dollar‘s recent strength. The market’s attention has now shifted to the upcoming U.S. PCE reading, which could provide crucial insights into inflation and directly impact the dollars strength. A softer-than-expected PCE reading could further weigh on the dollar.

The GBP/USD pair was rejected at its recent high level of 1.3430, suggesting a potential trend reversal signal. Should the pair fail to support above its previous low of 1.3315, it may suggest a bearish signal. The RSI remains close to the overbought zone while the MACD edges lower, suggesting the bullish momentum is easing.

Resistance level: 1.3350, 1.3440

Support level:1.3285, 1.3220