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Optimism regarding the reflection trade should be broadly supportive of the AUD but the RBA’s QE policy and trade tensions between Australia and China may keep a lid on upside potential. All in all, economists at Rabobank have raised their 12-month forecast to 0.78 for the AUD/USD pair.

Key quotes

“For now we expect that policy settings will remain extremely accommodative. While the reflation trade should keep AUD/USD well supported, RBA policy combined with the fear of trade tensions with China could keep a lid on further gains for AUD/USD.” 

“We have revised up our 12-month target a touch to 0.78 from 0.77, but remain of the view that AUD/USD could trade broadly sideways in the months ahead.”