The outlook for RBA rates, the debate about the relative health of the Australian economy, concerns about the Chinese economic recovery and the performance of the USD will all be key considerations for the direction of AUD/USD in the coming months.

In our view, the USD will continue to find support in H2. We expect Fed rates to remain at their peak level for some time and see risk of safe-haven demand for the USD into year-end on risks of a slowdown in US growth. On balance, this is likely to leave AUD/USD struggling to return to this month’s highs. 

We see most activity in the coming months constrained by the AUD/USD 0.66 to 0.68 range, but see scope for AUD/USD to return to the 0.70 level in the new year.