Australian Dollar Holds Firm on China Trade Data Support

Key Moments

China Trade Data Supports AUD, But Local Confidence Slides

AUD/USD stalled its recent rally on Tuesday, hovering around 0.7210 in Asian trading and breaking a four-day winning streak. The pair remained relatively stable after the latest Trade Balance figures from China, a key export destination and major economic partner for Australia.

In US Dollar terms, China’s Trade Balance registered $119.09 billion for August, coming in almost exactly in line with the $119.1 billion consensus estimate and surpassing the July figure of $112.5 billion. Export growth accelerated to 25% year-over-year in August, matching expectations and improving on the previous 23.9% pace. Imports increased 28.2% year-over-year, below the projected 30%, after a 27.5% gain in July.

Despite the supportive external backdrop, AUD/USD came under pressure as domestic sentiment deteriorated. The Westpac Consumer Confidence index dropped 5.2% to 84.4 in September, unwinding August’s 6% jump to 88.9 and signaling growing pessimism among Australian households.

Matthew Hassan, Westpac’s Head of Australian Macro-Forecasting, noted that weakening conditions in the property sector are increasingly undermining sentiment among homeowners. He underscored that nearly two-thirds of consumers now expect mortgage rates to rise, while heightened job insecurity – particularly in construction and hospitality – continues to erode confidence.

US Dollar Dynamics and Fed Expectations

Further downside in AUD/USD may be cushioned by a generally softer US Dollar. HSBC flagged that the recent stability in the Greenback might not be durable, pointing to underlying vulnerabilities. Analysts at the bank emphasize that they “remain cautious about broader structural concerns, especially around US fiscal sustainability,” and warn that these issues “could still return and weigh on the dollar yet again” even if near-term sentiment has improved.

Even so, the Dollar retains potential support as markets price in more than a 60% probability of a Federal Reserve rate hike in September. That adjustment followed a stronger-than-anticipated August US employment report, in which Nonfarm Payrolls increased by 162,000 and the Unemployment Rate held steady. Investors are now turning their attention to upcoming US Producer Price Index and Consumer Price Index releases later this week for additional guidance on the policy outlook.

Technical Picture: AUD/USD Maintains Bullish Bias Above Key Averages

On the daily chart, AUD/USD trades at 0.7210 and continues to exhibit a constructive bullish setup, with spot prices holding above both the nine-day and 50-day Exponential Moving Averages. This alignment, with the pair trading above short- and medium-term trend indicators, signals that buyers still maintain the upper hand. The 14-day Relative Strength Index around 66 reflects solid but not overstretched upside momentum, leaving room for additional gains before overbought conditions become a concern.

Initial technical support is located at the nine-day EMA near 0.7187, followed by a deeper layer of demand around the 50-day EMA at 0.7094 if selling pressure intensifies. Below those levels, more distant structural supports are identified at 0.6688, 0.6434, and 0.6348. These lower zones would likely only be tested if the current bullish framework deteriorates significantly.

China Trade Balance Indicator Snapshot

The Trade Balance in US Dollar terms, published by the General Administration of Customs of the People’s Republic of China, reflects the net difference between exports and imports of goods and services. A positive figure denotes a surplus, while a negative reading indicates a deficit. The release can generate volatility for the CNY and, given China’s global economic footprint, can also influence broader foreign exchange markets. Generally, a stronger reading is interpreted as supportive for CNY, whereas a weaker outcome is viewed as negative.