China’s trade balance in December rose to CNY 808.80 billion, up from CNY 792.57 billion. Exports increased by 5.2% year-on-year in December, while imports grew by 4.4% during the same time frame. In US Dollars, China’s trade surplus for December was $114.10 billion. This exceeded expectations of $113.60 billion and the previous figure of $111.68 billion. Exports were up by 6.6%, and imports increased by 5.7%, surpassing prior predictions.

The Impact On Australian Dollar

The Australian Dollar (AUD) rose by 0.16% in response to the Chinese trade data, with notable gains against the Swiss Franc. China’s customs department will provide its official trade data at 03:00 GMT, with a previous forecast of a trade balance of $113.60 billion. Before the data release, AUD/USD shows a positive trend. Potential resistance levels are at 0.6722, 0.6742, and 0.6766, while support is found at 0.6663, 0.6614, and 0.6587 if the price declines. The value of the Australian Dollar is affected by several factors, including the Reserve Bank of Australia’s interest rate policies, iron ore prices, and China’s economic health. The RBA sets interest rates that influence inflation and credit conditions, directly affecting the AUD’s value. As China is Australia’s largest trading partner, its economic performance and iron ore prices also shape demand for the AUD. A positive trade balance boosts the AUD as well. In January 2025, strong Chinese trade figures gave the Australian dollar a notable lift, with both exports and imports surpassing expectations. This demonstrated the clear connection between China’s economy and the AUD, a relationship that still guides our strategy on January 14, 2026.

Challenges In The Current Economic Landscape

Today’s environment is more complicated, requiring caution. Recent data reveals that China’s official manufacturing PMI for December 2025 stood at only 50.1, suggesting a weak recovery compared to last year. This indicates less potential for positive surprises in trade data, which were previously a strong catalyst for growth. Moreover, iron ore prices—a vital export for Australia—have fallen in early 2026 to around $125 per tonne, due to concerns over demand for Chinese steel. This is a shift from the stronger prices seen in late 2025, acting as a challenge for the AUD. The Reserve Bank of Australia has also paused its interest rate hikes, leaving the currency without clear domestic support. In this uncertain backdrop, strategies that capitalize on potential volatility may be more effective than those focused on a specific direction. Strategies such as buying straddles or strangles on AUD/USD ahead of upcoming Chinese GDP or trade data could be beneficial. This approach enables profit from significant price moves in either direction, which is likely if the data diverges from muted expectations. For those already holding long positions in AUD, purchasing out-of-the-money put options provides a cost-effective hedge. This strategy protects against a scenario where disappointing Chinese data may cause the AUD to drop. Such a defensive stance reflects the mixed signals from China’s economy, a stark contrast to the clearer picture from last year. Create your live VT Markets account and start trading now.

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