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  • AUD/USD drops at the week’s start amid mixed trade/political headlines that crossed wires during the weekend.
  • Chinese efforts to alter the loan pricing regime, statements on phase-one confused traders.
  • Geopolitical tension in Iraq and Syria negatively affects the market’s risk tone during the year-end thin trading session.

Having been as the week’s top performer by the last week, the AUD/USD pair pulls back to 0.6976 at the start of Monday’s Asian session. The Aussie pair might have taken the weekend news from China as a reason to step further away from the key 0.7000 round-figure.

South China Morning Post (SCMP) came out with the developments on the phase-one. The Chinese news media relied on Chinese ambassador saying that there is no problem with Beijing meeting its phase one commitments, but the US must also live up to its vows on issues such as Taiwan. Earlier, the US President Donald Trump said that the two sides are nearing a phase-one signing but no timetable was announced for the same.

Elsewhere, Bloomberg news mentioned that the People’s Bank of China (PBOC) ordered financial institutions to stop using the one-year lending rate as its reference rate beginning January 1. Instead, the banks will now have to rely on Loan Prime Rate (LPR). Some consider it as a sign of an upcoming rate cut as LPR is at 4.15% compared to the old benchmark at 4.35%.

Read More: What you need to know before markets open: AUD technically precarious, fundamentals are balanced

On the geopolitical front, Reuters conveyed that the US military undertook “defensive strikes” in Iraq and Syria against the Kataib Hezbollah militia group as per the US  Pentagon on Sunday. This doesn’t go well to the market’s risk sentiment amid sparse trading period during the year-end holiday mood.

The Asian markets are still less active to respond fully to the weekend headlines and await Tokyo open’s reaction. Additionally, a lack of major data/events on the economic calendar also restricts the market’s performance off-late.

Technical Analysis

The current price set-up confirms pullback from the monthly rising channel resistance, at 0.7000 now. However, bearish bias can’t be established unless breaking the channel’s support and 200-day Simple Moving Average (SMA) level surrounding 0.6900 mark.