Insights 
VT 
The AUD/USD pair stabilises around mid-0.6500s, following China’s disappointing PMI figures over the weekend. Despite this, there is support from differing Fed-RBA policy expectations and a recent breakout through the 100-day SMA.
China’s official Manufacturing PMI recorded its eighth month below the 50.0 mark in November, indicating contraction. The Non-Manufacturing PMI dropped to 49.5, the lowest since December 2022, marking the first contraction in almost three years.
Market Reactions to China’s Economic Measures
The immediate market reaction was short-lived due to easing trade tensions and government measures to boost consumption in China. A weaker US Dollar, alongside reduced expectations for further RBA policy easing, supports the Australian Dollar.
The USD Index remains near a two-week low with expectations of a Federal Reserve interest rate cut. Positive sentiment in the financial markets weakens the USD, benefiting riskier assets like the AUD/USD.
Technically, the breakout above the 100-day SMA supports further appreciation of the AUD/USD. Traders remain cautious and await forthcoming US macroeconomic data, including the ISM Manufacturing PMI, for further direction.
The NBS Non-Manufacturing PMI, gauging China’s service sector, the survey of executives indicates changing trends, with expansions above 50 and contractions below. The recent reading of 49.5 suggests a downturn, impacting the Renminbi.
Impact of Central Bank Policies
We are seeing the AUD/USD hold its ground just under the 0.6550 mark, which is a sign of strength considering the weak Chinese economic data from the weekend. The market appears more focused on the divergence between an unmoving Reserve Bank of Australia and a Federal Reserve that is expected to cut interest rates. This policy difference is creating a supportive floor for the currency pair.
The weakness in the US Dollar is the main story, driven by growing certainty of a Fed rate cut this month. Looking back at October’s inflation report in 2025, which showed US CPI cooling to 2.9%, we see why futures markets are now pricing in an over 90% chance of a rate cut at the December 17th meeting. This expectation is keeping pressure on the dollar and lifting risk-sensitive currencies like the Aussie dollar.
In contrast, the RBA is staying put, as Australia’s own inflation has remained sticky, with the latest monthly indicator from earlier in 2025 holding at 3.8%. This policy divergence, where one central bank is easing while the other holds firm, is a classic bullish signal for the AUD/USD. It suggests that interest rate differentials will increasingly favor the Aussie dollar in the coming weeks.
However, the Chinese data cannot be ignored, as the Non-Manufacturing PMI’s dip to 49.5 marks its first contraction since the reopening recovery began back in December 2022. To position for potential AUD/USD upside while protecting against a China-led downturn, traders could consider buying call options. This strategy allows for participation in a rally while capping potential losses if the Chinese economic situation worsens.
From a technical standpoint, the breakout above the 100-day simple moving average last Friday is a significant bullish development. We should now view that level, around 0.6520, as a key area of support. As long as the pair remains above this mark, the path of least resistance appears to be towards the next major resistance level near 0.6650.
Before placing aggressive bets, we must watch for the US ISM Manufacturing PMI data due out later today. A weaker-than-expected number would reinforce the US slowdown narrative, likely pushing the AUD/USD higher. A surprisingly strong reading could trigger a temporary pullback, which might offer a more attractive entry point for those betting on the longer-term trend.
