The AUD/USD is close to 0.6550 after the release of China’s Trade Balance data. This report shows a Trade Surplus for September of $90.45 billion, which is lower than the expected $98.96 billion. The US government shutdown is likely to continue until at least Tuesday due to the Columbus Day holiday.

China’s Trade Impact

In September, China’s Trade Balance was CNY645.47 billion, down from CNY732.7 billion. Both exports and imports rose during this month: exports increased by 8.4% year-over-year, while imports grew by 7.5% year-over-year. Previous rates were 4.8% and 1.7%, respectively. Trade tensions between China and the US have influenced the AUD/USD exchange rate. President Trump proposed imposing 100% tariffs on Chinese imports, and China vowed to respond. However, Trump later showed a willingness to support China’s economy. In Australia, talks have started about a A$1.2 billion minerals strategic reserve. This includes discussions about Australia’s critical minerals pricing and rare earth projects, which are part of a deal with the US. The weakening of the US Dollar due to the shutdown might help support the AUD/USD. Federal employees are facing delays in paychecks, and the shutdown is expected to last longer with no resolution in sight.

Key Factors Affecting the Australian Dollar

Several factors are influencing the Australian Dollar. These include interest rates from the Reserve Bank of Australia, the health of China’s economy, and Iron Ore prices. The Trade Balance, which shows the difference between exports and imports, also plays a significant role in determining the currency’s value. Currently, the AUD/USD is around 0.6550, responding to mixed signals from China’s economy. China’s Q3 2025 GDP growth was reported at 4.8%, missing the expected 5.0%. This highlights how sensitive the Australian Dollar is to its biggest trading partner. We’ve seen similar situations where disappointing Chinese trade data has limited any strength in the AUD. On the other side, the US Dollar is facing its own challenges due to political instability. Ongoing discussions in Congress about the budget deadline are causing uncertainty and reminding us of past government shutdowns that temporarily weakened the dollar. With the Federal Reserve keeping interest rates steady, this political risk is preventing the dollar from gaining momentum. In Australia, the central bank is being patient and relying on commodity prices. The Reserve Bank of Australia has maintained its cash rate at 4.10%, while the market eagerly awaits any hints of future cuts due to decreasing inflation since the highs of 2023. Additionally, iron ore prices have reduced to about $110 per tonne amid worries about Chinese construction demand, creating a cap on the Australian Dollar’s value. Reflecting on past volatility during US-China trade disputes in the late 2010s, we remember that tariff threats could cause significant market fluctuations. These events highlighted that the AUD is not just an economic currency but also a barometer of global risk sentiment, especially regarding China. Therefore, derivative traders should remain cautious about sudden geopolitical tensions as they continue to simmer. Considering the mixed pressures of a weak outlook from China and a politically restricted US dollar, implied volatility in AUD/USD options has decreased. This scenario suggests that range-trading strategies might be useful in the coming weeks. Selling option strangles with strikes set beyond the current 0.6400 to 0.6650 range could allow traders to collect premiums while key economic factors remain stable. Create your live VT Markets account and start trading now.

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