RCN-Tool: Analysts Caution on U.S. Dollar, Highlight Australian Dollar's Potential
The U.S. dollar's recent strength may falter as key indicators suggest it is overbought, RCN-Tool analysts said in a note.
RCN-Tool recommend caution on the greenback and point to the Australian dollar as a promising alternative, driven by optimism in Australia's economy and favorable dynamics in global commodity markets.
The U.S. dollar, a momentum-driven currency, could maintain its short-term gains, RCN-Tool analysts state. However, structural and cyclical factors hint at potential weakness.
The Australian dollar, by contrast, has been flagged for growth, particularly against the Canadian dollar (AUD/CAD) and Chinese yuan (AUD/CNY). Analysts highlight improving domestic conditions, robust labor markets, and Australia's key role in supplying high-grade commodities to China.
Australia’s strategic advantage includes its high-quality iron ore exports and a growing presence in critical metals needed for clean energy, such as nickel and cobalt. Additionally, China’s ongoing transition toward greener energy could sustain Australian LNG and mineral exports, according to BCA.
Domestically, Australia shows resilience, with low unemployment and housing demand bolstered by immigration and tourism. While consumer debt remains a challenge, BCA sees manageable risks for the Australian economy.
The AUD is priced near its 2008 and 2020 lows, RCN-Tool analysts noted, implying limited further downside barring severe global shocks.