CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
US English

AUD/USD price analysis: is a trend reversal imminent?

By Piero Cingari

14:37, 7 December 2021

AUD/USD exchange rate concept
AUD/USD price analysis: trend reversal after triple bottom? – Photo: Shutterstock

AUD/USD has been one of the worst performing major currency pairs over the past month, falling about 4% as investors' appetite for riskier assets has been hampered by concerns about the novel Covid-19 Omicron variant.

However, the Australian dollar has outperformed other major currencies over the last two sessions as risk sentiment recovered, causing the AUD/USD exchange rate to bounce from the 0.70 region, its lowest level since the start of the year.

The last time the AUD/USD pair recovered from 0.70 was in early November 2020, reversing a bearish trend and posting an 8% gain over the next two months as a result of the discovery of Covid-19 vaccines.

The underlying fundamental picture for AUD/USD remains highly influenced by the Federal Reserve and Reserve Bank of Australia (RBA) monetary policy divergences, as well as pandemic-related news.

In technical terms, AUD/USD has formed a so-called “triple bottom pattern”, which might increase the chances of a trend reversal. The first area of resistance is at 0.7120-0.7130, and a break beyond it might become a potential new support for the pair. A more hawkish Fed next week, or increased concerns over the Omicron variant, might halt the AUD/USD trend reversal and bring bears back.

What is your sentiment on AUD/USD?

Vote to see Traders sentiment!

Triple bottom on AUD/USD 

A chart showing technical analysis and triple bottom formation on AUD/USDAUD/USD weekly candlestick chart as of 7 December 2021 – Credit:

AUD/USD fundamental analysis

In recent weeks, the discovery of the new Omicron variant of Covid-19, which looks to be more infectious than the others already in circulation, has reignited investor’s worries about an economic slowdown, pushing the price of risky assets lower. 

Due to its high-beta profile, the Australian dollar (AUD), commonly known as the Aussie, underperformed as investors’ risk sentiment deteriorated, confirming its strong correlation with global equity markets. But in recent sessions, reassuring data on the new variant’s less severe symptoms have revived support for risky assets, resulting in a bounce in the AUD/USD exchange rate.

Confirmation of a milder form of the disease and a stronger capacity to manage it with the vaccinations currently in place could potentially bolster sentiment toward the Aussie ahead of next week’s Fed meeting.

In terms of monetary policy, there appears to be a difference in the approach between the Fed and the RBA at this juncture. The RBA left interest rates steady at a record low 0.1% in December, stressing that it is not in a hurry to raise them as long as inflation stays restrained. The Fed, on the other hand, is shifting towards a more hawkish position, as it considers speeding up tapering and boosting rates next year in reaction to growing price pressures in the United States.

This monetary policy divergence is mirrored in the short-term yield spread between Australia and the US, which narrowed significantly in the past month, contributing to the AUD/USD weakness. Since November, the two-year yield differential between Australia and the US has declined to -28 basis points (bps) from +9bps, owing to the RBA’s opposition to interest rate hikes, and AUD/USD has followed suit.


0.66 Price
-0.870% 1D Chg, %
Long position overnight fee -0.0074%
Short position overnight fee -0.0008%
Overnight fee time 22:00 (UTC)
Spread 0.00006


1.08 Price
-0.550% 1D Chg, %
Long position overnight fee -0.0080%
Short position overnight fee -0.0003%
Overnight fee time 22:00 (UTC)
Spread 0.00006


0.66 Price
-0.870% 1D Chg, %
Long position overnight fee -0.0074%
Short position overnight fee -0.0008%
Overnight fee time 22:00 (UTC)
Spread 0.00006


147.20 Price
+0.240% 1D Chg, %
Long position overnight fee 0.0112%
Short position overnight fee -0.0194%
Overnight fee time 22:00 (UTC)
Spread 0.010
Chart showing the correlation between AUD/USD and two-year yield spread between Australia and United States AUD/USD vs two-year AU-US yield spread as of 7 December 2021 – Credit: Koyfin

AUD/USD technical analysis

The Australian dollar has recovered to 0.71 versus the US dollar from a year-to-date low of 0.70, following 13 negative days in the preceding 16 sessions.

This is the third time since October 2020 that AUD/USD has rebounded from the 0.70 level. When the AUD/USD hit 0.70 in November 2020, it then gained around 8% in the next two months.

AUD/USD is now trading 3% below its 50-day simple moving average (SMA), 5.3% below the 200-day SMA and 11.4% below its 2021 highs.

On the daily chart, the 14-day relative strength index (RSI) has edged up to 36, after hovering in the oversold area since November 25.

The rebound following the triple bottom may raise the likelihood of a trend reversal for AUD/USD, if the global backdrop remains supportive for risky assets.

The first resistance is at 0.7130 (0.236 Fibonacci retracement level). A breakthrough of this level might may establish a potential new support for the pair, giving bulls hopes to look at 0.7770 (50% Fibonacci retracement) as the next resistance level.

Alternatively, the trend reversal for AUD/USD may prove to be short-lived if the Fed sounds more hawkish next week, or if investors’ fears around the Omicron variant intensify, leading bears back to target the 0.70 level.

Chart showing a technical analysis of AUD/USD in the daily timeframeAUD/USD 1-day candlestick chart and technical analysis, as of 7 December 2021 – Credit:

Before investing in any asset, always do your own research or contact your financial adviser before arriving at a decision. Remember that your decision should be based on your attitude to risk, your expertise in this market, the spread of your portfolio and how comfortable you feel about losing money. Never invest more than you can afford to lose and keep in mind that past performance is no guarantee of future returns.

Read more: Your guide to trading the AUD/USD pair

Markets in this article

0.66137 USD
-0.00578 -0.870%

Rate this article

The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
Capital Com is an execution-only service provider. The material provided on this website is for information purposes only and should not be understood as an investment advice. Any opinion that may be provided on this page does not constitute a recommendation by Capital Com or its agents. We do not make any representations or warranty on the accuracy or completeness of the information that is provided on this page. If you rely on the information on this page then you do so entirely on your own risk.

Still looking for a broker you can trust?

Join the 570.000+ traders worldwide that chose to trade with

1. Create & verify your account 2. Make your first deposit 3. You’re all set. Start trading