US Economic Indicators Mixed

The Australian Dollar (AUD) is gaining strength against the US Dollar (USD), thanks to remarks from Reserve Bank of Australia Deputy Governor Andrew Hauser. He highlighted the need for strict monetary policy to control inflation during a time when demand exceeds potential output, indicating a tough recovery ahead. The AUD is also supported by reduced trade tensions between the US and China, with China now allowing certain exports again. In October, China’s Consumer Price Index rose by 0.2% year-over-year. The US Dollar remains stable, receiving support from a possible agreement to end a federal shutdown, which would fund government departments until January 30 and ensure back pay for workers. The US economy is showing mixed signals. The Consumer Sentiment Index has fallen to its lowest level since June 2022, and job cuts have reached a level not seen in over twenty years. In contrast, Australia’s Trade Surplus improved, with exports rising by 7.9% month-to-month in September. Technical analysis for the AUD/USD shows resistance at 0.6535, while support is around 0.6500. The Australian Dollar has strengthened against many major currencies, particularly the Japanese Yen. The value of the AUD is influenced by the Reserve Bank of Australia’s monetary policy and economic indicators like inflation, GDP, and PMI, along with practices like quantitative easing and tightening. The RBA’s strong position signals further strength for the Australian Dollar in the coming weeks. The Deputy Governor’s comments directly address the ongoing inflation challenge. Recent quarterly inflation data from late October 2025 indicated a consumer price increase of 5.2%, still well above the central bank’s target of 2-3%.

US Economic Picture Uncertain

In contrast, the US economy appears more uncertain. While the potential resolution of the government shutdown provides some stability, consumer sentiment has sharply declined, and job cuts have reached their highest level in two decades for October. Recent US CPI data revealed that inflation cooled to 3.1%, suggesting the Federal Reserve might ease its strict policies, which could favor the AUD. The developments in China add another positive factor for the Australian Dollar. Improved trade relations and robust industrial production figures—growing 4.5% year-over-year in October 2025—indicate stability in Australia’s largest trading partner. A similar trend occurred in 2023 when positive news from China often boosted the AUD. For derivatives traders, this suggests strategies that could profit from a rising AUD/USD exchange rate. Buying call options on the AUD/USD with strike prices above the 0.6535 resistance level may provide a good opportunity to benefit from a potential breakout. This approach allows for greater upside potential while limiting risk to the premium paid for the options. From a technical perspective, a decisive move above the 50-day EMA near 0.6535 would confirm our outlook. Breaking this level could lead to more buying, pushing the pair towards the 0.6630 resistance area in the coming weeks. However, traders should also prepare for the risk of a false breakout and consider using put options with a strike near 0.6500 as a hedge against unexpected downturns. Create your live VT Markets account and start trading now.

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