While the expectation of further policy tightening should lend the AUD support, on the downside concerns over the sluggish recovery in China and the drop in iron ore prices from their March highs will dampen the outlook for the AUD.

Given our view that the USD will continue to garner support as the market prices out Fed rate hikes this year, we expect that AUD/USD will struggle to move beyond 0.67 on a three-month view. 

We see scope for AUD/USD to reach 0.70 next year as the Fed prepares to reduce interest rates and risk appetite increases.