**China’s Services PMI Decline** In October, China’s Services Purchasing Managers’ Index (PMI) dropped to 52.6, down from 52.9 in September, based on data from RatingDog. This result matched what analysts expected. After this data was released, the Australian Dollar (AUD) weakened. The AUD/USD exchange rate fell by 0.31% to 0.6470, which decreased the AUD’s value against the Japanese Yen, making it one of the weaker currencies. The table below shows how much the Australian Dollar changed against other major currencies. Notably, the AUD decreased by 0.25% against the US Dollar and by 0.07% against the New Zealand Dollar.

A heat map illustrating these currency changes offers a quick look at the shifts, with the base currency displayed in the left column and the quote currency along the top. For example, the AUD/USD pair shows a decline, indicating the AUD’s weakness against the USD. As of November 5, 2025, the latest data highlights a slight ongoing slowdown in China’s services sector. The Services PMI for October 2025 remains at 52.6, indicating growth, yet it shows a trend of slowing expansion. This has strengthened the view that the Australian Dollar may continue to weaken against all major currencies. **Chinese Economic Concerns and Trading Strategy** This services data fits into a broader pattern of a slowing Chinese economy. Last week, China’s official Manufacturing PMI for October 2025 unexpectedly dipped into contraction at 49.5, highlighting weakness in the factory sector. The combination of slowing services and shrinking manufacturing points to potential further downturns for assets linked to Chinese growth. For traders, this suggests that we should consider shorting the Australian Dollar in the upcoming weeks. Data shows that the AUD is currently the weakest currency of the day, particularly against the Japanese Yen, making the AUD/JPY pair an attractive option. To take advantage of this trend, we could buy put options on the AUD/USD or short AUD futures contracts. Historically, this strategy has proven effective. Between 2015 and 2016, fears of a hard landing for the Chinese economy led to a more than 15% drop in the AUD/USD over a few months. This history shows how sensitive the AUD is to negative reports from its largest trading partner. Going forward, we need to keep a close eye on upcoming Chinese economic reports, such as industrial production and retail sales for October 2025. Any signs of further slowing could put more downward pressure on the AUD, supporting our bearish outlook. Additionally, we should monitor for any stimulus announcements from Beijing, which could trigger a sharp, short-term recovery. In the options market, this situation suggests that implied volatility on the AUD might start to increase as uncertainty rises. This could make strategies like buying put spreads an effective way to prepare for a decline while limiting our risk. Such positions would benefit from a falling AUD/USD exchange rate over the next several weeks. Create your live VT Markets account and start trading now.

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