USD/AUD Outlook: Bearish, as the rate is below its recent average and near recent lows, primarily driven by fading USD strength.
Key drivers:
• Rate gap: The Federal Reserve is expected to signal one to two rate cuts, while the Reserve Bank of Australia may raise rates soon, favoring the Australian dollar.
• Risk/commodities: Oil prices remain high, supporting the AUD's strength as Australia is a key commodity exporter.
• One macro factor: Recent strong employment data in Australia suggests potential RBA policy tightening, enhancing the AUD's appeal.
Range: The USD/AUD is likely to drift lower within its recent 3-month range unless significant changes occur.
What could change it:
• Upside risk: A surprising increase in US employment data could boost the USD.
• Downside risk: Continued strong economic indicators from Australia, especially around inflation, could further elevate the AUD.
