The Australian Dollar has seen two consecutive days of gains against the US Dollar, currently trading at 0.6980, reflecting an increase of over 0.50%. This rise comes amid improved risk appetite, bolstered by strong data regarding China’s GDP and Retail Sales.
AUD/USD climbs as positive Chinese economic indicators and risk sentiment boost buyers
On Monday, China announced a 4.5% year-on-year growth rate for its economy in Q3 2026, an improvement from the previous quarter’s 4.3% and surpassing expectations. Retail Sales also outperformed forecasts, rising by 1% year-on-year in September, compared to the predicted 0.5% increase.
Meanwhile, tensions in the Middle East are ongoing, with the Houthis claiming responsibility for six attacks on Saudi Arabia in the last two days. Additionally, US President Donald Trump has relaxed energy sanctions on Russia.
Reports from Al Araby and Al Jadeed suggest that a significant announcement could be imminent this week, potentially easing the tensions between Washington and Tehran.
In the US, there were no major economic updates, yet the US Dollar nudged higher against a basket of six currencies, with the US Dollar Index (DXY) rising 0.19% to 101.97.
Notably, Kevin Hassett, the House National Economic Adviser, indicated on CNBC that inflation appears to require “some work.” This remark marks the first acknowledgment from a Trump administration official regarding rising prices.
Currently, money markets do not anticipate a Federal Reserve rate hike in October; however, the chances for December are around 91%, according to Prime Terminal.
Looking ahead, Australia will release the S&P Global Flash PMIs on October 22, while in the US, traders are preparing for data on ADP Employment Change over four weeks, jobless claims, and S&P Global Flash PMIs.
AUD/USD Price Forecast: Technical Analysis
In the daily chart, with the AUD/USD trading at 0.6980, there remains a bearish bias in the near term as the price remains below a strong cluster of 50-, 100-, and 200-day Simple Moving Averages around 0.7079. The pair is still slightly above an ascending trend-line support originating from 0.6833, close to 0.6916, but the latest Relative Strength Index reading of about 45 indicates diminishing upward momentum rather than a solid rebound, making the pair susceptible while it remains below these moving-average ceilings.
On the upside, initial resistance is at the SMA cluster around 0.7079, followed by the rising trend-line barrier from 0.6865 near 0.7089, and then a horizontal limit at 0.7198; closing above this range would be necessary to alleviate the current bearish pressure. On the downside, initial support is at the previously mentioned trend line around 0.6916, followed by the earlier downward trend reference at 0.6358, with a break below 0.6916 likely signaling a deeper decline towards that lower structural support.
Australian Dollar FAQs
Interest rates set by the Reserve Bank of Australia (RBA) significantly affect the Australian Dollar (AUD). Also, being a resource-rich nation, the price of its largest export, Iron Ore, plays a crucial role. The status of the Chinese economy, Australia’s biggest trading partner, along with domestic inflation, growth rate, and Trade Balance, also influence the AUD. Additionally, market sentiment—whether investors are inclined towards risky assets or safe havens—affects AUD, with a risk-on environment being beneficial for it.
The RBA influences the AUD by adjusting the interest rates that Australian banks charge one another, which in turn impacts overall economic interest rates. The RBA aims to maintain an inflation rate of 2 to 3% through such adjustments. Higher interest rates, relative to other major central banks, tend to support the AUD, while lower rates have the opposite effect. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former typically being negative for the AUD and the latter positive.
As China’s largest trading partner, the strength of the Chinese economy greatly impacts the value of the AUD. A robust Chinese economy tends to increase demand for Australian exports, thereby raising the AUD’s value. Conversely, when China’s growth is slower than anticipated, the AUD usually suffers. Surprises in Chinese economic data can thus have a direct and significant effect on the AUD and its pairings.
Iron Ore is critical to Australia’s export economy, contributing about $118 billion annually, primarily to China. Consequently, fluctuations in Iron Ore prices directly influence the AUD. Generally, an increase in Iron Ore prices leads to a rise in the AUD due to enhanced aggregate demand, and a decrease results in the opposite effect. Additionally, higher Iron Ore prices usually correlate with a stronger Trade Balance for Australia, which also strengthens the AUD.
The Trade Balance, which measures the difference between a nation’s exports and imports, can also sway the AUD’s value. A positive Trade Balance indicates strong export performance, thus bolstering the AUD. Conversely, a negative Trade Balance can weaken it, as it suggests that spending on imports exceeds earnings from exports.
