US dollar rally at risk; Aussie dollar offers opportunities

Investing.com– Recent strength in the US dollar may be fading as key indicators suggest it is overbought, analysts at BCA Research said in a note.

Analysts advise caution against the dollar and point to the Australian dollar as a promising alternative due to the optimism of the Australian economy and the favorable dynamics of global commodity markets.

The US dollar, a bullish currency, could hold its short-term gains, BCA analysts said, but structural and cyclical factors hint at potential weakness.

“We remain below the 110 level,” BCA analysts said, citing the possibility of softer US policy under President-elect Donald Trump to keep the dollar strong.

The Australian dollar, on the other hand, was seen to rise, particularly against the Canadian dollar () and ().

Australia’s strategic advantage includes its high-quality iron ore exports and growing presence in key clean energy metals such as nickel and cobalt.In addition, China’s continued transition to green energy could sustain Australian LNG and mineral exports, according to the BCA.

Domestically, Australia is showing resilience, with low unemployment and housing demand boosted by immigration and tourism.While consumer debt remains a challenge, the BCA sees manageable risks to the Australian economy.

The AUD price is near its 2008 and 2020 lows, analysts said, suggesting limited further declines barring major global shocks.