Rabobank expects the Australian dollar to face near-term headwinds before resuming its longer-term uptrend. The bank sees scope for short covering in favour of the US dollar over the next one to three months, which could push AUD/USD back towards 0.65. However, it maintains a 12-month target of 0.89 for the pair.The outlook hinges on policy trajectories at the Reserve Bank of Australia and the Federal Reserve. Despite solid second-quarter GDP data, Rabobank anticipates the RBA will cut interest rates by 25 basis points at its November, February and May meetings, easing policy out of restrictive territory. By contrast, the Fed is projected to lower rates by a total of 125 bps through the end of 2026.Markets, however, are pricing in only 43 bps of RBA easing over the next six months, compared with around 88 bps for the Fed. Rabobank argues that if traders are underestimating the scope of RBA cuts or overestimating Fed risks, the US dollar could regain ground against the Australian dollar in the short run. This article was written by Eamonn Sheridan at investinglive.com.