Australian Dollar eyes 0.70 as China GDP surprise powers rally
- AUD/USD gains over 0.50% to 0.6980, extending its recovery.
- China's GDP grows 4.5%, while Retail Sales beat expectations.
- December Fed hike odds remain near 91% ahead of Flash PMIs.
The Australian Dollar registers two days of consecutive gains versus the US Dollar, trading at 0.6980, up more than 0.50% as risk appetite improved, while the Aussie was supported by strong data on China’s GDP and Retail Sales.
AUD/USD advances as stronger Chinese economic data and improving risk appetite support buyers
On Monday, China revealed that the economy grew 4.5% YoY in Q3 2026, up from 4.3% in the previous quarter and exceeding forecasts. Retail Sales doubled forecasts of 0.5%, rose by 1% YoY in September, up from 0.4%.
In the meantime, attacks in the Middle East continued, with the Houthis claiming six attacks on Saudi Arabia in the last 48 hours, while US President Donald Trump eased energy sanctions on Russia.
Al Araby and Al Jadeed reported that a breakthrough is expected to be announced this week, potentially halting the escalation between Washington and Tehran.
In the US, the economic docket remained absent, but the Greenback edged higher against a basket of six currencies, the US Dollar Index (DXY). The DXY rises 0.19% to 101.97.
Of note, the House National Economic Adviser, Kevin Hassett, said on CNBC that inflation looks like “it is needing some work”. This is the first time an official in the Trump administration has recognised that prices are higher.
So far money markets do not expect a Fed hike in the October meeting, but for December, the odds are near 91%, revealed Prime Terminal.
In Australia, the economic docket will feature S&P Global Flash PMIs on October 22. In the US, traders brace for the release of the ADP Employment Change 4-week average, jobless claims and S&P Global Flash PMIs.
AUD/USD Price Forecast: Technical outlook
In the daily chart, AUD/USD trades at 0.6980, keeping a bearish near-term bias as spot holds beneath a dense cluster of the 50-, 100- and 200-day Simple Moving Averages (SMAs) around 0.7079. Price is still perched slightly above an ascending trend-line support coming from 0.6833 near 0.6916, but the latest Relative Strength Index (14) reading around 45 suggests waning upside momentum rather than a decisive rebound, leaving the pair vulnerable while it stays trapped under these higher moving-average barriers.
On the topside, initial resistance is located at the SMA cluster around 0.7079, followed by the rising trend-line hurdle from 0.6865 near 0.7089 and then the horizontal cap at 0.7198; a daily close above this band would be needed to ease the current bearish pressure. On the downside, the first notable support is the aforementioned uptrend line near 0.6916, ahead of the prior downward trend reference around 0.6358, with a break of 0.6916 likely to open the way for a deeper slide toward that lower structural floor.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
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