The Australian Dollar (AUD) found support thanks to cautious feelings about the Reserve Bank of Australia’s (RBA) policy. The AUD increased against the US Dollar (USD), breaking a three-day losing streak. Despite this, the AUD performance came as the market anticipated no interest rate cuts from the US Federal Reserve (Fed) in December. In September, Australia’s Building Permits rose by 12% month-on-month (MoM), beating the expected 5.5% growth. China’s Manufacturing Purchasing Managers’ Index (PMI) dropped to 50.6 from 51.2, impacting economic sentiment due to Australia’s close trade ties with China. At the same time, the US Dollar gained strength as the likelihood of Fed rate cuts decreased. Traders now see just a 69% chance of a December cut, down from 93% a week earlier. The Federal Reserve cut interest rates by 25 basis points, with mixed opinions among its members.

AUD/USD Pair Analysis

The AUD/USD pair is trading around 0.6550, indicating a time of consolidation on the daily chart. Resistance is at 0.6600, and downside support is at 0.6544; breaking this level could lead to further declines. The Australian Dollar showed strength against many major currencies, with the biggest gains against the Japanese Yen. Looking back, we recall the market’s anxiety over the RBA’s policy before its late-2023 decision. Fast forward to November 2025: the situation has changed as the RBA has cut rates multiple times to support a slowing economy. Recent Q3 2025 inflation data in Australia showed an annual rate of 2.9%, comfortably within the RBA’s target range, which supports its more cautious stance. During this period, the US Dollar’s strength was based on declining expectations for a Federal Reserve rate cut, but this proved to be short-lived. The Fed has since lowered its benchmark rate to 3.75%–4.0% in response to weakening economic data throughout 2024 and 2025. The latest US unemployment figures from October 2025 rose to 4.1%, providing more reasons for the Fed to maintain an accommodative policy.

China’s Economic Influence

China continues to pose challenges for the Australian Dollar, a trend that has been developing for years. The latest Caixin Manufacturing PMI for October 2025 showed a reading of 50.2, indicating only slight growth and highlighting ongoing weakness in Australia’s largest trading partner. This instability in China limits significant rises for the AUD, even with a weaker US Dollar. For derivative traders, the clash between dovish central banks and weak Chinese growth suggests that volatility in AUD/USD might increase. Currently trading near 0.6850, the pair is stuck between supportive interest rate differentials and low demand for Australian commodities. This situation is ideal for exploring strategies like straddles or strangles to take advantage of potential price movements. Considering these conditions, selling out-of-the-money puts on the AUD/USD could be a good strategy to earn premium, betting that the support level around 0.6700 will hold due to the Fed’s dovish approach. Alternatively, traders expecting a gradual increase might consider buying call spreads to reduce the cost of a bullish position while managing their risk. The key is to watch both US and China data for the next big move. Create your live VT Markets account and start trading now.

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