China’s Politburo has recently said that the country’s economy is stable and shared plans for future policies. They aim to implement active macroeconomic strategies, tackle risks in important areas, and ensure stable employment and market confidence. They plan to use proactive fiscal policies and maintain a moderately loose monetary policy. In the coming year, efforts will also focus on strengthening the domestic market and improving the coordination of domestic and international economic activities. The Australian Dollar rose slightly, trading at 0.6645, with a 0.08% increase for the day. The value of the Australian Dollar is influenced by interest rates set by the Reserve Bank of Australia (RBA) and the condition of the Chinese economy, which is Australia’s largest trading partner. The RBA impacts the AUD by adjusting interest rates to keep inflation steady. The health of the Chinese economy plays a crucial role; if China does well economically, it tends to boost demand for Australian exports. Prices for Iron Ore, a key Australian export, have a major effect on the AUD’s value. A positive trade balance, which indicates strong export demand, can strengthen the Australian Dollar, while a negative balance can weaken it. China’s leaders are signaling plans for more economic support through active and looser policies, indicating a desire for growth in the new year. Their commitment to enhancing the domestic market suggests a renewed focus on construction and manufacturing. This implies that demand for important industrial commodities, like iron ore, is likely to rise in the coming weeks. Recent data shows iron ore prices stabilized around $115 per tonne in Q4 2025 after a dip earlier in the year. This news from Beijing could help push prices back toward the highs of early 2024, when prices frequently exceeded $135. Traders should consider this a signal to explore long positions in commodity futures or options linked to mining companies sensitive to these price changes. The Australian dollar is currently trading near 0.6720 and is very responsive to the health of the Chinese economy and commodity prices. Since the Reserve Bank of Australia has kept its cash rate steady at 4.35% for much of 2025, this external boost from China’s economy supports a strong case for potential gains in the AUD. We believe that buying call options on the AUD/USD is a smart way to prepare for possible upward movement, aiming for a rise above the 0.69 level. We can look back to 2023 to see how similar Chinese stimulus measures helped revive global commodity markets. During that time, even small policy support from Beijing resulted in a significant increase in industrial metals and the Australian dollar. While the situation may differ, the policy direction set by the Politburo mirrors that past strategy. We should also be cautious about how China handles its “international economic and trade battle” mentioned in their statement. If trade tensions increase, it could lower risk appetite and counteract the positive impact of domestic stimulus. Therefore, using defined-risk strategies, like buying call spreads on the AUD, could be a smart way to capture upside while limiting potential losses.

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