The Australian Dollar (AUD) gained strength against the US Dollar (USD) after China released its economic data. In October, China’s Retail Sales rose by 2.9% compared to the previous year, exceeding the expected 2.7% but falling short of September’s 3.0%. Industrial Production grew by 4.9% year-over-year, which was below the 5.5% forecast and down from a 6.5% increase in the previous month. Additionally, Fixed Asset Investment declined to -1.7% year-to-date, missing the anticipated -0.8%, and down from September’s -0.5%. Meanwhile, Australia’s labor market showed positive signs, with the Unemployment Rate dropping to 4.3% in October, which was better than the expected 4.4%. Employment Change saw a significant increase of 42.2K. In contrast, the US Dollar faced challenges due to economic uncertainties, despite the end of the government shutdown. The US Dollar Index (DXY) performed weakly, hovering around 99.20, affected by labor market and inflation worries. Mixed signals from the US economy, including an inflation rate of 3%, raised the chances of a Federal Reserve interest rate cut. The CME FedWatch Tool indicated a nearly 50% chance of a rate reduction in December. For currency pairs, AUD/USD traded around 0.6540 on Friday, moving above its nine-day EMA, which suggests a possible bullish trend. The AUD is strongly connected to interest rates, iron ore prices, the health of the Chinese economy, and Australia’s Trade Balance.

Divergence Favouring The Australian Dollar

As of November 14, 2025, there is a clear advantage for the Australian dollar over the US dollar. The strong Australian labor market and signs of recovery in China create a positive outlook for the AUD. This stands in contrast to the uncertainty surrounding the US economy after the recent government shutdown. For those trading derivatives, this situation hints at further gains for the AUD/USD pair. Australia’s unemployment rate dropping to 4.3% supports the Reserve Bank of Australia’s cautious approach, making interest rate cuts less likely soon. This difference in monetary policy, as the Federal Reserve considers a possible December rate cut, gives a strong reason to be bullish on the AUD. The mixed economic data from China brings some optimism. The better-than-expected retail sales figures are encouraging, particularly after ongoing worries about China’s property sector that persisted throughout 2024. With iron ore prices stable around $125 per tonne, a key export for Australia stays strong, further supporting the Australian dollar.

Challenges Facing The US Dollar

On the flip side, the US dollar is struggling to find a clear direction. The impacts of the lengthy 43-day government shutdown might make key economic data from October unreliable, adding uncertainty for traders and the Fed. The rise in announced job cuts reported by Challenger, Gray & Christmas poses a significant concern, especially compared to the resilient labor market we observed in 2024. Mixed messages from Federal Reserve officials complicate the dollar’s position. While some emphasize economic strength, others, like Neel Kashkari, point out that inflation at 3% is still too high, leading to policy confusion. This environment of uncertainty and weak private labor data makes traders more inclined to favor currencies with a clearer economic outlook. From a tactical view, we are observing the AUD/USD pair stabilize above key short-term moving averages, indicating underlying strength. Buying call options with a strike price close to 0.6630, near the upper resistance level, can be a good strategy to capitalize on a potential breakout in the weeks ahead. The premium for the option determines the maximum risk involved in the trade. To manage risk, traders should keep an eye on key support levels around the 50-day EMA at 0.6536. A drop below this level could indicate a loss of momentum. Therefore, purchasing protective put options around the strike price of 0.6470 could help guard against unexpected downturns caused by negative global sentiment or sudden changes from the Fed. Create your live VT Markets account and start trading now.

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