The central bank's Super Week has indeed lived up to its reputation! Last week, the Federal Reserve's dovish decision to pause interest rate hikes sent global stocks and bonds soaring. Coupled with weak non-farm employment data, market expectations for further Fed rate hikes cooled, resulting in the largest single-week gain for U.S. stocks this year. The U.S. dollar continued to decline, and at the same time, the Bank of Japan's decision led to a roller-coaster ride for the Japanese yen. From a market perspective, global risk assets experienced a significant surge, with both the U.S. dollar and U.S. bond yields declining, and gold falling below the $2000 level, ending a three-week upward trend, while oil prices saw a substantial drop of up to 6%.

The U.S. non-farm employment report for September revealed an increase of 150,000 jobs, significantly less than the previously reported 336,000 jobs. The unemployment rate also rose to a nearly two-year high of 3.9%. Meanwhile, global stock markets experienced their strongest single-week rally in over a year, with declining global yields and unexpectedly strong corporate earnings. The U.S. employment report supported optimistic sentiment about the peak in global interest rates, potentially marking a turning point for the markets. Global stock markets saw a cumulative gain of 4.2% this week, the largest single-week increase since November 2022. The three major Wall Street indices are on track for their strongest week this year, with gains of over 5% each. The S&P 500 index had its best day in six months on Thursday.

All of this is contingent on the fact that the Federal Reserve, the Bank of England, the European Central Bank, and other central banks have paused their rate hikes. If the Federal Reserve adopted a "dovish" pause policy last Wednesday, the Bank of England adopted a "hawkish" pause policy on Thursday. However, the overall market reaction has been consistent, with bonds, stocks, and risk assets surging. The 10-year Treasury yield saw its largest increase in over a month.

Due to disappointing employment data and a slowdown in average hourly earnings, bond yields, which had put pressure on the stock market for the past three months, plummeted last Friday. The 10-year Treasury yield fell more than 9 basis points to 4.57%, below the 5% high it reached last month. The 2-year Treasury yield also fell by 7 basis points to 4.9%. The U.S. dollar also weakened, which is good news for emerging markets.

Gold prices saw significant volatility in the U.S. market last Friday. Following the release of the weaker-than-expected non-farm report, gold surged over $16 to above $2004. However, it retreated from its intraday high after a moderate decline in U.S. service sector activity in October and ended the week with a 0.68% technical pullback, closing at $1992.00. Silver, on the other hand, rose 0.43% to $23.214 for the week.

International crude oil futures prices fell by over 2%. WTI crude oil spot prices dropped 2.00% to $80.60 per barrel, with a weekly decline of 4.94%. Brent January crude oil futures fell 2.26% to $84.89 per barrel, with a weekly decline of 6.18%.

The U.S. non-farm employment data for October fell short of expectations. Following the report, expectations of Fed rate hikes plummeted, while expectations of rate cuts rose. Wall Street reacted positively to the report, with the U.S. dollar index plunging 1.03% to 105.06, staying above 105, but briefly hitting a low of 104.94, the largest single-day drop since July 12, as of September 20. At the same time, the offshore Chinese yuan faced less pressure, with the U.S. dollar falling 0.53% to 7.2884 by the close of trading.

Looking ahead for the week:

As tensions in the Israeli-Palestinian conflict have cooled, the subsequent impact of the conflict on the global political and economic landscape remains to be observed. This week, several Federal Reserve officials will make appearances and give speeches, including Chairman Powell, New York Fed President Williams, and others, which may provide further clues about future interest rate paths.

Currently, traders are betting that the Federal Reserve's rate hike cycle is nearing its end, and the interest rate swap market even predicts that the Fed will cut rates by more than 100 basis points in 2024. Besides the Federal Reserve, the European Central Bank, the Bank of Japan, and the Reserve Bank of Australia are also worth watching.

In terms of earnings reports, although the peak of Q3 earnings season for U.S. stocks has passed, this week still features some notable companies, including "Buffett's favorite" Western Oil, electric vehicle companies Rivian and Lucid, recently listed UK chip design giant Arm, and Chinese companies like NIO.

Monday (November 6th): Eurozone October final Services PMI, Eurozone November Sentix Investor Confidence Index, OpenAI's inaugural developer conference "OpenAI DevDay," U.S. October New York Fed Global Supply Chain Pressure Index.

Tuesday (November 7th): Reserve Bank of Australia announces the interest rate decision, Eurozone September Producer Price Index (PPI) MoM, U.S. September Trade Balance.

Wednesday (November 8th): New York Fed President Williams moderates a discussion at the New York Economic Club, Dallas Fed President Kaplan delivers a speech at a joint event with the Kansas City Fed, U.S. API Crude Oil Stock for the week ending November 3rd, Eurozone September Retail Sales MoM, U.S. September Wholesale Sales MoM.

Thursday (November 9th): Japan September Trade Balance, New York Fed President Williams delivers a speech, Bank of Japan releases a summary of the October Monetary Policy Meeting discussions, Bank of Japan Governor Kuroda interviewed by UK media, U.S. Initial Jobless Claims for the week ending November 4th, Speeches by 2024 FOMC voters Bostic and Barkin.

Friday (November 10th): Richmond Fed President Barkin speaks about the U.S. economy and Fed policy prospects, European Central Bank President Lagarde delivers a speech, Fed Chair Powell speaks at an expert panel meeting hosted by the IMF, Dallas Fed President Kaplan delivers a speech, ECB President Lagarde participates in a fireside chat, U.S. November 1-Year Inflation Rate Expectations.

U.S. Dollar Index:

The recent upward momentum of the U.S. dollar seems somewhat tenuous. Last week, U.S. job growth in October slowed more than expected, with the unemployment rate reaching a near two-year high of 3.9%. The Federal Reserve kept the benchmark interest rate unchanged within the range of 5.25% - 5.50%. Additionally, bond yields, which had been pressuring financial markets for the past three months, experienced a sharp drop last week. The U.S. Dollar Index briefly fell to its lowest level since mid-September at 104.94, rebounding to above 105.00 at the close of the week, marking a 1.42% decline for the week. On Friday, it recorded its largest single-day decline since July 12. After three consecutive months of gains from August to October, the U.S. Dollar Index saw an overall decline last week. Market expectations suggest that the Federal Reserve has ended its rate hikes, and the U.S. dollar successfully broke below the recent level of contention around 106.00.

Last Friday's non-farm employment data fell short of market expectations, and the unemployment rate rose to a two-year high of 3.9%. Despite the high likelihood that the Federal Reserve will not raise interest rates again this year and the uncertainty about when it might cut rates, the short-term downside for the U.S. Dollar Index may be limited, and it may continue to exhibit strong fluctuations at higher levels. Looking ahead, as the economic divergence between Europe and the United States persists, the U.S. dollar may maintain its strength in the short term.

The question of whether the U.S. dollar has peaked or is retracing is a topic of ongoing debate in the market. The recent sharp drop in bond yields and the disappointing U.S. non-farm data may provide a clearer direction for both bulls and bears. From a daily chart perspective, the recent uptrend seems somewhat strained. While the U.S. Dollar Index reached multi-month highs earlier this month at 107.34, the lack of follow-through buying interest has increased the possibility of a downturn, or at least a pause and potential reversal. For the U.S. Dollar Index, returning to the thresholds of 105.06 (last week's closing price) and 104.95 (last week's low, also the upward trendline from the low in July at 99.57) has raised concerns, indicating a technical pullback. The initial targets are set at 103.97 (76.4% Fibonacci retracement level of the move from 102.93 to 107.34) and 103.95 (100-day moving average) areas. However, until the trend is confirmed, the path of least resistance for the U.S. Dollar Index during this period remains mostly sideways or slightly upward. Only a drop below the 200-day moving average (currently around 103.50) would reverse the upward trend that has been in place since July. Conversely, a successful break above 105.56 (38.2% Fibonacci retracement level) and 105.85 (mid-channel axis) would likely boost bullish sentiment, potentially leading to further gains towards levels like 106.68 (upper channel boundary) and 107.34 (previous high).

Conclusion for this week: The path of least resistance for the U.S. Dollar Index during this period remains mostly sideways or slightly upward. Only a drop below the 200-day moving average (currently around 103.50) would reverse the upward trend that has been in place since July. This week's trading range: 103.95—106.00. Strategy for this week: Selling the U.S. Dollar Index on rallies is advised.

WTI Crude Oil:

WTI crude oil declined for the second consecutive week.

On Friday, November 3rd, after the risk premium associated with the Israel-Palestine conflict diminished and signs of weak demand resurfaced, WTI crude oil saw its second consecutive weekly decline. However, oil prices also received some support as weak U.S. jobs data supported speculations of the Federal Reserve potentially halting its rate hikes. Additionally, a weaker U.S. dollar made it more affordable for importers to purchase crude oil. With reduced concerns about the Middle East crisis spreading, investors are also watching to see if Saudi Arabia will keep its official selling prices unchanged.

WTI crude oil fell by $1.95 per barrel, a 4.94% decline, closing at $80.60 per barrel, with a total weekly decline of $4.18 per barrel. The conflict between Hamas and Israel not only increased oil price volatility but also raised the risk of broader conflicts erupting, leading oil traders to pay premiums for oil shipments from the Middle East next year. Despite the increase in geopolitical risks adding a premium to annual trades, oil futures in recent months have fallen to levels seen before Hamas attacked Israel.

Looking at the daily chart, WTI crude oil experienced initial gains followed by a decline last week. Early in the week, it briefly tested the 60-day moving average (currently at $84.90) but faced resistance. Subsequently, oil prices saw a rapid decline, briefly dropping below the psychological level of $80.00 and reaching a low of $79.91 per barrel before reversing back above $80.00 before the week's close. Overall, it maintained a soft and volatile trend.

It is anticipated that this week, the $80.00 level will be considered a pivotal point for potential shifts in sentiment. If it falls below $80.00 and the support area at $79.91 (last week's low), there is the possibility of oil prices testing the $78.68 level (150-day moving average), followed by the next level at $77.35 (61.8% Fibonacci retracement level of the move from $67.10 to $93.94).

Conversely, if oil prices remain above $80.00 this week, they may challenge the $81.75 level (upper boundary of the downward channel) and the $82.75 level (trendline extending from the low of $77.50 on August 24). A breakthrough could extend the uptrend towards $84.79 (last week's high) and $84.90 (60-day moving average).

Conclusion for this week: It is expected that the $80.00 level will be pivotal for sentiment, and if it falls below $80.00 and the $79.91 support area, there is the potential for oil prices to test $78.68 (150-day moving average) and $77.35 (61.8% Fibonacci retracement level of the move from $67.10 to $93.94). This week's trading range: $77.35—$84.90. Strategy for this week: Consider buying crude oil on dips.

Spot Gold:

Expect gold prices to consolidate this week.

Gold prices continue to be influenced by global political factors as waning market concerns weaken the safe-haven appeal of precious metals. Despite the ongoing conflict between Israel and Hamas, the enduring turmoil in the Middle East has been brought under control. The political crises that have driven gold prices higher are becoming fatigued. While political events can provide tradable momentum for the gold market, they do not attract long-term investors. Gold's rise based on specific political events requires constant escalation to maintain its safe-haven buying.

Buyers remained cautious in the short term last week, and as a result, gold prices are expected to consolidate. On the other hand, gold prices managed to recover some ground during the Federal Reserve's interest rate meeting. Weaker U.S. jobs data has been beneficial for gold due to the softening of the U.S. dollar and declining bond yields. From another perspective, assuming the situation in the Middle East does not escalate, gold prices may continue to struggle to sustain a rally above the $2,000 mark, as the likelihood of further Fed rate hikes has diminished but not been completely ruled out. Rate expectations may rise rapidly again, putting downward pressure on gold prices, especially if the U.S. economy demonstrates continued resilience.

After rising nearly 7% from a low of $1,810.50 to $2,009.50 (the best monthly performance since March) since last month, the outlook is neutral. After a significant short-term rise, the market needs consolidation, but so far, the correction has been relatively shallow. Therefore, it is not ruled out that gold prices may test lower levels again in the short term, potentially revisiting $1,977.20 (14-day moving average) and $1,970.00 (low from the 1st of this month). The next level to watch is $1,962.50 (50% Fibonacci retracement level of the move from $1,810.50 to $2,009.50). If gold prices remain under downward pressure, they will continue to test $1,948.90 (165-day moving average). The RSI indicator on the daily chart suggests that the downward trend is corrective, with limited bearish potential. Currently, gold prices are above all moving averages, with the 14-day moving average crossing above the longer-term 165-day moving average, forming a bullish golden cross pattern. If gold prices rise back above the $2,000 level this week and stabilize above it, they may retest the previous high at $2,009.50 and further aim for $2,020 (upper boundary of the sideways channel).

Conclusion for this week: If gold prices rise back above the $2,000 level this week and stabilize above it, they may retest the previous high at $2,009.50 and further aim for $2,020 (upper boundary of the sideways channel). This week's trading range: $1,977.20—$2,020. Strategy for this week: Consider buying gold on dips.

Spot Silver:

Silver prices showed a mixed pattern last week.

Since early October, international silver prices have seen a rapid rebound from around $20 to a high of $23.70, mainly driven by sudden tensions in the Middle East. The impact of geopolitical risks on precious metals can be divided into two parts: whether geopolitical risks will trigger a significant amount of funds seeking safe havens and whether geopolitical risks will undermine the stability of the U.S. dollar. Generally, influenced by market sentiment, the most significant price changes in precious metals often occur when geopolitical conflicts show periodic escalations. When the situation lacks progress or remains unclear, the likelihood of a decline in precious metal prices increases, and they may gradually lose market attention.

Currently, there has been no new turning point in the Israel-Palestine conflict, and the high-level operation of the U.S. dollar index is attracting some safe-haven funds. Therefore, the boost to silver from the Israel-Palestine conflict has largely been absorbed by the market. The latest U.S. data still shows resilience, and the probability of a soft landing for the U.S. economy is increasing. Considering that U.S. inflation data continues to decline, and the U.S. job market is cooling, the pressure on the Federal Reserve to continue raising interest rates has weakened, but the confirmation of the end of the rate hike cycle still requires time to observe. Therefore, the high-level operation of the U.S. dollar index and U.S. bond yields will continue to suppress silver prices from breaking higher in the short term. Future attention should focus on changes in the Federal Reserve's policy path, geopolitical emergencies, and market fund dynamics.

From the daily chart, silver prices showed a mixed pattern last week but failed to break through the 200-day moving average at $23.28. Overall, in the past two weeks, silver prices have been in a sideways channel, struggling for direction. A significant support level below can be found at $22.85 (50% Fibonacci retracement of the bounce from $25.01 to $20.68) and $22.45 (lower boundary of the sideways channel), but if this zone is breached, it is likely that silver will fall back into a bearish trend, with substantial support estimated at $21.80 (low from October 13). Currently, as long as the situation in the Middle East remains highly tense, silver prices still have the opportunity to break above the 200-day moving average, which is technically bullish. In the short term, key levels to watch are $23.36 (61.8% Fibonacci retracement level) and $23.40 (resistance trendline extending down from the high of $25.01 in August). A breakout would shift the focus to the $24.09 level (76.4% Fibonacci retracement level).

Conclusion for this week: Looking ahead, whether influenced by geopolitical factors or central bank demand, gold prices appear stronger than silver prices. If the gold-silver ratio continues to rise, the advantage of silver allocation will be greatly reflected, making it a better strategy opportunity to go long on silver or short the gold-silver ratio. This week's trading range: $21.80—$24.09. Strategy for this week: Consider buying silver on dips.

AUDUSD

The Australian dollar received some upward momentum last week, which appears to have strengthened.

Last week, the Federal Reserve maintained interest rates unchanged, and the cautious tone in their language was just enough to reinforce bets that the Fed's policy tightening cycle has ended. The futures market suggests about a 70% chance that the Fed will not raise interest rates further. In contrast, the Australian market has recently shifted to a 65% probability that the Reserve Bank of Australia will raise rates at its meeting on November 7. Additionally, the U.S. non-farm payroll data released last week was worse than expected. With the expectations of a switch in interest rate prospects between the two countries, combined with the sharp drop in U.S. bond yields last week, the U.S. dollar index briefly fell to its lowest level since mid-September, at 104.94. The Australian Dollar/US Dollar (AUD/USD) received some upward momentum last week. During this week's trading hours, the AUD/USD saw a significant increase, breaking through several key levels, including 0.64, 0.65, and 0.6490 (high points in August and September), as well as the 75-day moving average (0.6443). While technical indicators show strength, it's important to acknowledge the possibility of consolidation in the short term, given the significant resistance. A reversal below 0.64 may lead to a pullback towards recent lows.

On the daily chart, the AUD/USD has clearly broken through 0.6395 (upper boundary of the sideways channel) and the 55-day moving average at 0.6396. This is the first time it has broken this moving average since August 1. If it can break the key resistance level at 0.6508, which is the 38.2% Fibonacci retracement level of the decline from the high of 0.6895 in July to the low of 0.6270 in October, and 0.6490 (high points in August and September), it will confirm that a medium-term bottom has been successfully established. In this case, the AUD/USD could continue to rise towards 0.6567 (150-day moving average) and 0.6582 (50% Fibonacci retracement level). However, due to the rapid rebound last week, there is a risk of overbought correction this week. It's essential to watch whether the 0.6395-0.6396 area can hold as support. Breaking below these support levels would lead to further testing of 0.6325 (middle boundary of the sideways channel).

Conclusion for this week: Although the Australian dollar is in an oversold state, considering the broader market sentiment, it might not be an ideal choice to sell the Australian dollar against the U.S. dollar. If the AUD/USD can remain above the 0.6395-0.6396 levels after an adjustment, it still has the potential to continue its upward rebound.

This week's trading range: 0.6396-0.6582. Strategy for this week: Consider buying the Australian dollar on dip.

USDJPY

The US dollar remains in a significant uptrend.

Before the end of last week, worse-than-expected non-farm payroll data and a sharp drop in bond yields caused the US dollar to decline across the board. The USD/JPY pair fell below 150 to 149.19, moving away from the one-year high of 151.72 it reached earlier in the week. The Federal Reserve maintained interest rates unchanged last Wednesday, and policymakers still cannot determine whether financial conditions have tightened enough to control inflation or whether the economic performance continues to exceed expectations and requires further constraints. However, investors are increasingly convinced that US interest rates have peaked, with federal funds rate futures markets suggesting less than a 20% chance of a rate hike in December. This sentiment boosted investors' risk appetite on Friday, putting pressure on the US dollar and indirectly benefiting the Japanese yen. Nonetheless, the Bank of Japan's slow progress in ending its accommodative monetary policy has not been enough to stir up market favor for the yen. Instead, it has encouraged traders to keep pushing down the yen to test at what level the Japanese government would tolerate. Therefore, from a macro perspective, as long as the Bank of Japan drags its feet on the path to ending its accommodative monetary policy, there is a certain difficulty in the yen strengthening. In the short term, what could help stabilize the yen is whether the Bank of Japan intervenes.

On the daily chart, the USD/JPY continues to trade above the 55-day moving average at 148.38 and 148.49 (23.6% Fibonacci retracement level of the decline from 138.07 to 151.72). If the USD/JPY falls below these support levels, it is likely to ease the tension for further yen depreciation. On the downside, the 65-day moving average (147.82) is hovering around the 148 yen level, with 147.80 yen being another noteworthy support area that has played this role multiple times before. The convergence of these support levels increases the credibility of this view. In the latter part of this week, the USD/JPY may retreat below the 150 yen level. Although speculation around potential Fed actions continues, this decline could ultimately represent an opportunity for the bulls to enter. If it manages to rise above 150 once again, the USD/JPY will likely revisit last week's high of 151.72 and the 32-year high of 151.94. Breaking above this level would then target 152.85 (upper boundary of the upward channel).

Conclusion for this week: The current uptrend in the USD/JPY remains intact, reinforcing investors' belief that this market may provide opportunities for those who are patient. There has been no selling pressure in this market as of now, and potential short positions depend on falling below the 147.80 yen level, followed by a comprehensive reassessment of the broader economic landscape.

This week's trading range: 147.80-151.05.

Strategy for this week: Consider selling the US dollar on rallies.

GBPUSD

The British pound posted its largest weekly gain since early November last year.

The GBP/USD made a strong rebound from 1.2095 to 1.2390 during last week's trading, despite significant volatility. This surge marked the largest weekly gain since early November last year and also the largest single-day increase since March 10th this year.

While the UK economy has faced similar inflationary pressures as the United States, it has not experienced a similar level of recovery, and consumer confidence has not fully recovered. The struggle against inflation with repeated rate hikes could bring devastating blows. Therefore, the market can only wait and see whether the Bank of England prioritizes inflation or the economy. The increase in long-term UK government bond yields is largely a result of global factors and has helped tighten financial conditions, partly achieving the Monetary Policy Committee's goals. The question going forward is how long the pause in rate hikes will last. Financial markets expect this to be a relatively stable period. The door for future rate hikes remains open, and the committee may remain vigilant about further volatility and risks in the coming months.

Looking at the daily chart, it appears that the British pound successfully bottomed within the 1.2037-1.2070 range over the past two weeks. The outcome of the US non-farm payroll data on Friday provided a chance for the pound bulls to catch the bears off guard, leading to a significant rebound to 1.2390, despite considerable volatility. Amid these turbulent conditions, a bullish trend appears to be brewing for the week ahead. If the GBP/USD effectively breaks above 1.2380 (upper boundary of a sideways channel) and 1.2390 (last Friday's high), it could release substantial upward momentum, pushing the pound quickly toward 1.2435 (200-day moving average) and 1.2459 (38.2% Fibonacci retracement level of the rise from 1.3143 to 1.2037). If the market continues to rise, the next target would be 1.2590 (50% Fibonacci retracement level). On the downside, the key focus is on the 50-day moving average at 1.2305. Once it breaks below the 50-day moving average (which is a significant resistance level), the next level to watch would be 1.2240 (centerline of the sideways channel).

Conclusion for this week: This week leans towards buying the dips, indicating a preference for long positions. The overall market sentiment continues to shift upward, and this is expected to be confirmed once the dust settles this week.

This week's trading range: 1.2240-1.2590. Strategy for this week: Consider buying the British pound on dips.

EURUSD

The short-term rebound of the euro is facing challenges.

Last week, U.S. employment data for October came in below market expectations, with the unemployment rate rising to a nearly two-year high of 3.9%. The Federal Reserve maintained its benchmark interest rate within the current range of 5.25% - 5.50%. Additionally, the bond yields that have been pressuring financial markets for the past three months saw a sharp decline last week. The U.S. dollar index briefly fell to its lowest level since mid-September at 104.94. The EUR/USD pair made a noticeable rebound, rising over 1.5% last week and achieving its largest weekly gain since July.

Looking ahead, despite a notable slowdown in inflation in the Eurozone, the euro might be able to reverse its recent weakness. In terms of economic data, Eurozone PMI figures for October fell below expectations and declined further from the previous values. The GDP in the Eurozone for the third quarter saw a 0.1% quarter-on-quarter decline. In addition, Eurozone CPI in October grew by 2.9% year-on-year, with core CPI dropping from 5.5% to 5%, indicating further inflation moderation.

The euro made a significant surge in the latter part of last week, drawing the attention of many market participants. It appears that the currency pair is prepared to move rapidly towards the 50-week moving average at 1.0771. The 50-week moving average is a widely-watched technical indicator that can often serve as a key support or resistance level.

From a technical perspective, the weekly chart shows the EUR/USD pair maintaining a range near the 100-week moving average around 1.0676. However, as the euro approaches the crucial level of the 50-week moving average at 1.0771, it's important to pay attention to potential resistance levels above, including 1.0861 (50% Fibonacci retracement level of the rise from 1.1275 to 1.0448) and 1.0945 (high from August 28th).

An important level to watch on the downside is the range of 1.0638-1.0643, which serves as a potential support area. The former is the 50-day moving average, while the latter is the 23.6% Fibonacci retracement level. Breaking below this support area could lead to a test of the 1.0480-1.0500 range, which provides significant support. The next level to watch is around 1.0448 (low from October 3rd).

Conclusion for this week: While investors may be looking for opportunities to buy the U.S. dollar at lower levels, it's important to exercise restraint and caution. The euro should not be seen as a buying opportunity until it effectively breaks above the 200-day moving average at 1.0807. For the time being, such events are largely disconnected from the current market dynamics.

This week's trading range: 1.0600-1.0945. Strategy for this week: Consider buying the euro on dips.

USDCNH

The Chinese renminbi (RMB) to US dollar exchange rate is expected to rebound to 7.0-7.1.

Following the release of the U.S. non-farm payrolls report, the U.S. dollar index and various ten-year U.S. bond yields plummeted. The ten-year U.S. bond yield briefly fell by over 10 basis points, dropping below 4.50% for the first time in nearly a month, while the offshore Chinese renminbi surged by 400 points. It closed the week at 7.2860, down 0.57%, reaching its lowest point in three weeks. The U.S. Bureau of Labor Statistics reported that non-farm payrolls in the U.S. increased by 150,000 in October, below expectations of an 180,000 increase. The unemployment rate was 3.9%, reaching a high not seen since January last year, with an expectation of 3.8%. This suggests that U.S. job growth has slowed down, indicating a cooling labor market. The employment report aligns with the view that the U.S. economy is slowing down. It is expected that the Federal Reserve will cut interest rates in the first half of next year. The ten-year U.S. bond yield dropped by over 10 basis points, falling below 4.50% for the first time in nearly a month, with the ten-year U.S. bond yield down 9 basis points to 4.572%. The U.S. dollar index fell by 1.02% to 105.05. The offshore Chinese renminbi rose above 7.29 for the first time in three weeks. Some overseas investment funds have started buying the renminbi exchange rate as they notice that if the Federal Reserve ends its interest rate hike cycle, both Chinese and U.S. monetary policies will tend to ease, prompting many speculative capital that had shorted the renminbi due to differential monetary policies between China and the U.S. to cover their short positions and exit the market.

At present, many Wall Street investment institutions expect the exchange rate of the Chinese renminbi to the U.S. dollar to rebound to the range of 7.0-7.1 by the end of the first quarter next year. The reasons behind this outlook include the differentiation in the fundamental economic situations of China and the U.S., where China's economy is maintaining its recovery, while the U.S. economy might be slipping into a recession, providing support for the renminbi exchange rate. Additionally, the end of the Federal Reserve's interest rate hike cycle will bring about a new valuation correction effect on the exchange rates of emerging market currencies, including the renminbi.

From the daily chart, the USD/CNH exchange rate broke below the support areas of 7.3086 (23.6% Fibonacci retracement level of the rise from 7.1160 to 7.3682) and 7.2930 (lower boundary of a horizontal channel) before declining to a weekly low of 7.2860. At present, the offshore Chinese renminbi is trading below 7.30. Given this, there appear to be signs of the end of the uptrend that has been in place since early 2023, and it may be challenging for the exchange rate to break through upper resistance levels once again. The USD/CNH exchange rate is expected to initiate a correction to 7.2668 (100-day moving average) and 7.2421 (50% Fibonacci retracement level) in the near future. If it breaks below, it may test the 7.2123 (61.8% Fibonacci retracement level) and 7.20 (a psychological market level). On the upside, if the USD/CNH exchange rate rebounds, the key resistance levels to watch are 7.30 (a psychological market level) and 7.3295 (centerline of the horizontal channel).

Conclusion for this week: The most significant factor currently suppressing the renminbi exchange rate is the high level of the China-U.S. interest rate spread (the difference in ten-year government bond yields between China and the U.S.). Data indicates that as of November 2nd at 4:00 PM, the China-U.S. interest rate spread reached -204 basis points, not far from the previous record of -217 basis points set earlier this year. Due to the persistently high interest rate spread, some overseas quantitative hedge funds are still maintaining relatively large short positions in the renminbi.

This week's trading range: 7.2123-7.3295. Strategy for this week: Consider shorting the U.S. dollar on rallies.

 Disclaimer:

The information contained herein (1) is proprietary to BCR and/or its content providers; (2) may not be copied or distributed; (3) is not warranted to be accurate, complete or timely; and, (4) does not constitute advice or a recommendation by BCR or its content providers in respect of the investment in financial instruments. Neither BCR or its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.