The Australian Dollar (AUD) has fallen, and the AUD/USD pair is trading around 0.6600 this morning in Asia. This drop comes after reports that China asked steelmakers to stop new purchases from BHP, although Mysteel has disputed this claim. In September, Australia’s AiG Industry Index rose to -13.2, while the S&P Global Manufacturing PMI decreased to 51.4. The Reserve Bank of Australia kept the Official Cash Rate at 3.6%. Governor Bullock noted that inflation is stable but did not provide guidance on future changes. The US Dollar Index is steady at 97.80 as traders await the US ADP Employment Change and ISM Manufacturing PMI data, all while the government remains shut down. The chance of Fed rate cuts has increased to 97% for October and 76% for December. US Job Openings rose to 7.23 million, though the hiring rate fell to 3.2%.

Australian Building Permits and AUD/USD Outlook

Australian building permits dropped 6% in August, more than the expected 5.5% decline. The AUD/USD shows a bullish trend, with the potential to reach 0.6707, while support stands at 0.6590. Factors affecting the AUD include Reserve Bank rates, iron ore prices, the health of the Chinese economy, and Australia’s inflation, growth, and trade balance. Currently, the Australian dollar is stable at around 0.6600 against the US dollar. However, the main factor here is the expected weakness of the Greenback. Conflicting reports about China halting Australian iron ore purchases are causing some uncertainty, but the more significant story is about monetary policy. The market has priced in a high 97% chance that the US Federal Reserve will cut interest rates in October. This outlook for the US contrasts significantly with Australia’s approach, as the Reserve Bank just kept its cash rate at 3.6%, offering no hints of future cuts. This difference creates a favorable environment for the AUD/USD pair. The ongoing US government shutdown also impacts the dollar, particularly since the Labor Department has paused important data releases like the monthly jobs report. The main risk to monitor is the state of the Chinese economy and commodity prices. Iron ore futures on the Dalian exchange declined in the last week of September 2025, signaling concerns about demand. If it’s confirmed that China is pulling back on purchases, the Australian dollar could quickly drop, no matter what the US Federal Reserve decides.

Strategy for Protecting Against Downside Risk

With a stronger possibility of a weaker US dollar, we should look into buying AUD/USD call options to prepare for a potential upward move in the weeks ahead. The technical chart shows a bullish tendency, possibly testing a recent 12-month high near 0.6707. This strategy lets us gain from upward movement while limiting our potential loss to the option’s premium. However, to guard against sudden drops from negative news in China, it’s wise to pair this strategy with a protective put option. Purchasing puts with a strike price below critical support, like the 0.6540 level, would serve as insurance. This helps us manage downside risk if the iron ore situation worsens or if Australian economic data does not meet expectations. Create your live VT Markets account and start trading now.

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