Aussie traded downside against the greenback on Monday. The drop can be linked to multiple catalysts – Omicron fear creating sour sentiment in the market, People’s Bank of China’s (PBOC) surprise rate cut and Slump of the Magellan Financial Group to its worst session on losing a major client.

Growing fears on the omicron virus creates sour sentiment in the Market. Analysts at National Australia Bank said “Markets are very cautious ahead of the Christmas break, with concerns about the impact of the Omicron strain.” “More discontinuity in supply chains from Omicron could add to inflation concerns.”

The People’s Bank of China made a surprise announcement of a five basis points (bps) of a cut to the benchmark one-year Loan Prime Rate (LPR) top 3.80% meanwhile keeping the five-year rate intact around 4.65%. This in turn created economic worries in Australia (largest customer).

Elsewhere, China’s troubled firm Kaisa tries to create market optimism, However it fails to do, while filing for resumption of trading of the company’s shares. Moreover Reuters reported, “It has not received any notice from bondholders to accelerate repayments yet as the embattled Chinese property developer has not repaid a $400 million bond, or interest on notes due in 2023 and 2025.”

Magellan Financial Group MFG.AX plunged 32.9% after disclosing it had lost its largest client St James’s Place SJP.L, which accounted for around 12% of the company’s annual revenue.

On the other hand, Hawkish comments from Fed favored the greenback. Fed Governor Chris Waller said on Friday that he thought a rate increase in March would be “very likely” and that the central bank could start to run down it balance sheet in mid-2022. Meanwhile, erstwhile dove Mary Daly, president of the San Francisco Fed, refused to rule out a March increase and voiced support for as many as three increases next year.

Ken Cheug, chief Asian foreign-exchange strategist at Mizuho Bank said “The Fed’s rapid hawkish tilt combined with Omicron’s troubling spread intensified a risk-off mood, which led investors to squirrel away their capital in safe havens, including Treasuries and the dollar, with moves exacerbated by year-end profit taking.”

AUD/USD 4 Hour Chart:

Support: 0.7101 (S1), 0.7080 (S2), 0.7039 (S3).

Resistance: 0.7164 (R1), 0.7205 (R2), 0.7227 (R3).

All the catalysts weighs on the Australian dollar while favoring the Safe-haven US dollar. We expect a bearish trend for AUD/USD.