- AUD/USD still on course for 0.75 in September says Westpac.

- Despite RBA's currency concerns and "dovish" policy stance.

- But risk of AUD/USD correction growing as U.S. election nears.

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GBP/AUD spot rate at time of writing: 18121Bank transfer rate (indicative guide): 1.7487-1.7614FX specialist providers (indicative guide): 1.7849-1.7958More information on FX specialist rates hereThe Australian Dollar remained on course to set a new two-year high on Tuesday despite fresh scrutiny from the Reserve Bank of Australia (RBA), which again acknowledged strength in the antipodean currency this week, although analysts also say the risk of a correction is growing.

Australia's central bank left its cash rate and three-year bond yield target unchanged at 0.25% on Tuesday, in line with market expectations, although policymakers surprised investors by increasing as well as extending a special lending programme called the 'Term Funding Facility'.

The RBA said banks will now be able to borrow up to 2% of their outstanding credit at the central bank cash rate of 0.25% up until June 2021 in order to support lending to the real economy. The earlier scheme enabled banks to borrow 3% of outstanding credit but was due to expire this month.

"This decision will have a number of impacts. It further reduces the need for banks to go to wholesales markets for funding. This will add to the downward pressure on credit spreads. It also signals the RBA’s willingness to add further stimulus where it can," says David Plank, head of Australian economics at ANZ.

The bank also said it's still mulling alternative ways which it can use monetary policy to support the Australian economy, which was buffeted again in the third quarter by fresh restrictions on activities that hampered the recovery in large population centres like Melbourne and key regional economies.

Above: AUD/USD rate shown at daily intervals.

RBA policymakers have left markets on standby for further policy action in the months ahead. The bank also pledged not to raise interest rates until "progress is made toward full employment" and until "the bank can be confident inflation will "be sustainably within the 2%-to-3% target band.

The RBA had struggled for years even before the pandemic to lift Australian inflation sustainably into the target band amid a cooling of the housing market and slowdown in discretionary spending growth that were thought to have roots in high household debt levels and stagnant wages.

"This is more dovish than we expected. The RBA also noted that the A$ is "around its highest level in nearly two years", its first comment on the A$ since March 3, though it did note that the "US dollar has depreciated against most currencies over recent months" and we have higher commodity prices as drivers," says Robert Rennie, head of financial market strategy at Westpac. "We tend to see these two factors continuing in the near term, with the Fed's recent policy tweak to 'flexible average inflation targeting' which will be formalised Sep 15/ 16 and China's currently almost insatiable demand for iron ore as key."

Rennie says the RBA's "dovish" message isn't enough to knock the Australian Dollar off its upward trajectory and that AUD/USD remains on course to hit 0.75, its highest level since June 2018, during September. However, Westpac has warned that the risks of a correction will grow the higher the Aussie climbs.

Above: AUD/USD rate shown at weekly intervals with Fibonacci retracements of 2018 downtrend.

Rising commodity prices have lifted the Aussie of late while the U.S. Dollar has been sold heavily, leading to a more than 30% increase in AUD/USD from March lows, although with the November U.S. election just around the corner some analysts fear that a correction is coming.

President Donald Trump will struggle to secure reelection in November, if opinion polls are still to be believed, as Democractic Party candidate Joe Biden remains the favourite.

A Democratic Party presidency is widely perceived as likely to favour higher taxes and heavier regulation, which could upset the stock market and lift the negatively-correlated U.S. Dollar while weighing on the likes of AUD/USD.

Ironically, the bearish consensus on the Dollar has been realised in 2020 for the first time in at least three years although if the recent correlation between the Dollar and stock markets is to remain in place, the market might need President Donald Trump to come from behind and win in November to see the U.S. currency remain in decline.

"AUD/USD could continue to strengthen despite the rather overbought conditions. The next resistance level of note is at 0.7550 followed by 0.7640. As indicated above, 0.7150 is a solid support but looking beyond the next couple of months, the current long-term positive outlook is deemed as intact as long the 55-week exponential moving average is not breached (level is currently at 0.6860)," says Quek Ser Leang, a strategist at UOB.