Australian Dollar: UOB Group’s Analysis and Its Implications
The Australian Dollar (AUD) has shown some strength in recent trading sessions, but according to UOB Group’s FX analysts Quek Ser Leang and Peter Chia, any further advance is likely to be part of a higher range between 0.6230 and 0.6330.
Current Market Scenario
The AUD/USD pair has been on an uptrend since the beginning of the year, with the pair breaking above the key resistance level of 0.6200 in January. However, the pair has faced some resistance near the 0.6300 level, which has capped its upside potential in the short term.
Analysts’ View
Quek Ser Leang and Peter Chia of UOB Group believe that the AUD is likely to trade with an upward bias in the longer run. They note that the Australian economy is expected to recover strongly from the pandemic, with the country’s vaccination rollout gaining momentum and the government’s fiscal stimulus measures providing support to the economy.
Key Resistance Levels
The analysts also point out that the AUD is likely to face resistance at the 0.6390 level, which is a key psychological level and the high from March 2020. A break above this level could lead to a significant upward move in the AUD/USD pair.
Implications for Individuals
For individuals holding AUD-denominated assets or planning to travel to Australia, a stronger AUD could lead to higher costs in terms of purchasing power parity. For instance, if you are an Australian resident planning to travel to the US, a stronger AUD would mean that your purchasing power in the US would be lower.
- Higher costs for Australian tourists traveling to the US or other countries
- Lower returns for Australians holding US dollars or US dollar-denominated assets
Implications for the World
A stronger AUD could have broader implications for the global economy. For instance, it could lead to a repricing of risk in financial markets, with investors reallocating capital to riskier assets in emerging markets.
- Higher commodity prices due to Australia’s role as a major exporter of commodities
- Impact on global trade flows as the AUD could make Australian exports more competitive
Conclusion
In conclusion, UOB Group’s analysis of the Australian Dollar suggests that the AUD is likely to trade with an upward bias in the longer run. While any further advance in the short term is likely to be part of a higher range between 0.6230 and 0.6330, a break above the key resistance level of 0.6390 could lead to a significant upward move in the AUD/USD pair.
For individuals, a stronger AUD could lead to higher costs when traveling or holding US dollars or US dollar-denominated assets. On a broader scale, a stronger AUD could have implications for global trade flows and commodity prices.
