Insights 
VT 
Rabobank predicts short-term challenges for the Australian dollar before it resumes an upward trajectory. The possibility of increased support for the US dollar in the next one to three months could drive the AUD/USD exchange rate towards 0.65. Rabobank’s 12-month forecast for this pair remains at 0.89.
RBA and Fed Policies
The analysis depends on monetary policies from the Reserve Bank of Australia and the Federal Reserve. Despite strong GDP performance in the second quarter, Rabobank expects the RBA to lower interest rates by 25 basis points at meetings in November, February, and May. In contrast, the Federal Reserve is anticipated to cut rates by 125 basis points in total by the end of 2026.
Current market predictions indicate only 43 basis points of RBA easing in the upcoming six months, compared to approximately 88 basis points for the Fed. Rabobank points out that if traders misjudge the RBA’s potential rate cuts or the Fed’s risks, the US dollar might strengthen against the Australian dollar in the short term.
In the coming weeks, we expect the Australian dollar to face some difficulty before it begins to strengthen again over the long run. There is a strong chance that traders will start buying back the US dollar, which could push the AUD/USD pair down from its current level near 0.68 towards 0.65. This presents a near-term opportunity for traders anticipating a dip.
The key to this view is the actions of the central banks. We believe the Reserve Bank of Australia will need to cut its interest rate more aggressively than the market is currently pricing in, especially with the latest August 2025 inflation data showing a clear cooling trend. While the RBA held its cash rate steady at 4.35% in its meeting last week, we are forecasting cuts beginning in November.
Market Discrepancies
Meanwhile, the market seems to be overestimating how quickly the US Federal Reserve will act. While the August US jobs report was softer, Fed officials have remained firm that they need more conclusive evidence before easing policy from its current restrictive stance. This discrepancy between market pricing and likely central bank action should benefit the US dollar for the next one to three months.
For derivative traders, this outlook suggests positioning for a lower AUD/USD exchange rate. This could be done by buying put options on the Australian dollar or entering into short AUD/USD futures contracts. The aim would be to profit from a move down towards that 0.65 target before the end of this year.
However, this is a short-term strategy, as we anticipate a significant reversal over the next year. This pattern is similar to what we saw in 2022, where initial US dollar strength eventually gave way once the Federal Reserve’s policy direction became clearer. We still maintain that the Australian dollar will recover strongly, with our 12-month target for the AUD/USD exchange rate remaining at 0.89.
