Australian Dollar remains stronger following key economic data from China

• Australian Dollar gains as improved labor market data boost the RBA caution.
• China's Retail Sales rose 2.9% YoY in October, against the 2.7% expected and 3.0% in September.
• The US Dollar struggles as economic caution outweighs improved sentiment after the US government shutdown ended.

The Australian Dollar (AUD) advances against the US Dollar (USD) on Friday, recovering losses registered in the previous session. The AUD/USD pair gains ground following the release of China's Industrial Production and Retail Sales data for October. Any change in the Chinese economy could impact the AUD as China is a major trading partner for Australia.

The National Bureau of Statistics (NBS) showed Friday that China's Retail Sales climbed 2.9% year-over-year (YoY) in October, against the 3.0% in September but exceeding the 2.7% expected. Meanwhile, Industrial Production increased 4.9% YoY in the same period, compared to the 5.5% forecast and 6.5% seen previously. The Fixed Asset Investment came in at -1.7% year-to-date (YTD) YoY in October, missing the expected -0.8% figure. The September reading was -0.5%.

The AUD received support as Australia's improved employment data reinforced the cautious sentiment surrounding the Reserve Bank of Australia (RBA) policy outlook. RBA Deputy Governor Andrew Hauser said on Wednesday, "Our best estimate is that monetary policy remains restrictive, though the committee continues to debate this." Hauser added that if the policy is no longer mildly restrictive, it would have significant implications for future decisions.

US Dollar moves little after ending government shutdown

• The US Dollar Index (DXY), which measures the value of the US Dollar against six major currencies, is extending its losses and trading around 99.20 at the time of writing. The Greenback is under pressure as renewed caution about the US economic outlook outweighs the boost from improved market sentiment after the government shutdown ended.
• National Economic Council Director Kevin Hassett cautioned that some October data may "never materialize," as several agencies were unable to gather information during the shutdown. Initial private-sector reports suggest a cooling labor market and wavering consumer confidence, with persistent concerns about inflation.
• US President Donald Trump signed the government funding bill on Thursday, marking the official end of the record 43-day government shutdown the US history.
• Cautious Fedspeak decreased the odds of a Federal Reserve (Fed) rate cut in December. The CME FedWatch Tool shows markets pricing in nearly a 50% chance of a 25-basis-point Fed rate cut in December, down from 69% a week ago.
• Federal Reserve Bank of St. Louis President Alberto Musalem said Thursday that rates are now closer to neutral than restrictive and the US economy remains resilient. Musalem stressed the need for caution, noting there is limited room to ease without risking overly accommodative policy.
• Minneapolis Fed President Neel Kashkari, speaking at the Opportunity & Inclusive Growth Institute's Research Conference, said parts of the labor market appear strained and the economy is sending mixed signals. He added that inflation remains too high at 3%.
• Automatic Data Processing (ADP) released the US Employment Change on Tuesday, showing an average weekly job loss of 11,250 in the four weeks to October 25. Weaker-than-expected private US labor data increased the likelihood of the Federal Reserve (Fed) policy easing.
• Challenger, Gray & Christmas announced that US employers slashed 153,074 jobs in October, up from the 55,597 cuts announced in October 2024.
• The Australian Bureau of Statistics (ABS) released the Unemployment Rate on Thursday, which declined to 4.3% in October from 4.5% in September, against the market expectations of 4.4%. Meanwhile, the Employment Change arrived at 42.2K in the same month from 12.8K (revised from 14.9K) prior, sharply exceeding the market forecast of 20K.
• Australia's Full-Time Employment rose by 55.3K in October, from a rise of 6.5K in the previous reading (revised from 8.7K). Participation Rate steadies at 67%, while the Part-Time Employment decreased by 13.1K in October, versus an increase of 6.3K prior.

Australian Dollar stays above 50-day EMA

The AUD/USD pair is trading around 0.6540 on Friday. On the daily chart, the pair appears to be consolidating within a rectangular range, reflecting sideways movement. Nonetheless, it remains above the nine-day Exponential Moving Average (EMA), suggesting firm short-term bullish momentum.

The AUD/USD pair could target the rectangle's upper boundary around 0.6630. A break above the rectangle would cause the emergence of the bullish bias and support the pair to test the 13-month high of 0.6707, recorded on September 17.

On the downside, the immediate support lies at the 50-day EMA of 0.6536, followed by the nine-day EMA at 0.6528. A break below these levels would weaken the medium- and short-term price momentum and prompt the AUD/USD pair to test the lower boundary of the rectangle around 0.6470, followed by the five-month low of 0.6414, which was recorded on August 21.