The Australian dollar could soon fall below 70 cents

• The Australian dollar was slammed on Friday, falling to multi-month lows against the greenback.

• Continued financial market volatility and renewed weakening in the Chinese yuan were the likely catalysts behind the latest slide.

• Strategists say the AUD/USD could fall below 70 cents in the coming days.

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The Australian dollar remains under pressure having fallen to two-month lows on Friday.

Here's the scoreboard at 8.30am in Sydney on Monday.

AUD/USD 0.7041 , 0.0009 , 0.13%
AUD/JPY 78.1 , -0.17 , -0.22%
AUD/CNH 4.8745 , 0.0035 , 0.07%
AUD/EUR 0.6190 , 0.0002 , 0.03%
AUD/GBP 0.5568 , 0.0008 , 0.14%
AUD/NZD 1.0465 , 0.001 , 0.10%
AUD/CAD 0.9569 , 0.0004 , 0.04%

On Friday, the AUD/USD tumbled to .7030, the lowest level since October 26. It's now fallen close to 5% since December 4, extending the drop since late January to 13.4%.

Steep declines in stocks, base metals and crude oil prices, along with adjustments to positioning ahead of year-end, were the likely catalysts behind the move with the greenback strengthening despite the commencement of a partial shutdown of the US government and speculation US President Donald Trump may look to remove Jerome Powell as US Fed Chairman.

"A partial government shutdown commence on Friday after the Senate failed to give Trump his $US5 billion worth of wall funding," says Ray Attrill, Head of FX Strategy at the National Australia Bank.

"420,000 government employees to work without pay with 380,000 forced to take unpaid leave.

"Thursday is the absolute earliest that the shutdown could be resolved, but realistically it looks unlikely before the New Year."

Adding to investor nerves, a report from Bloomberg said Trump had been sounding out Fed officials on whether he could fire Fed chair Jerome Powell, although US Treasury Secretary Steve Mnuchin took to twitter over the weekend to say Trump is not considering such a move.

Despite the raft of negative US dollar headlines, the US dollar index (DXY) rebounded strongly on Friday, recovering after hitting a one-month low a session earlier.

That pushed the AUD/USD back towards the multi-year lows struck in late October, mirroring similar weakness in the offshore Chinese yuan which has been influential on the Aussie dollar this year.

As seen in the AUD/USD weekly chart below, a break below .7020 in the coming days will leave the pair at the lowest level since early 2016.

Attrill at the NAB says such a move remains a distinct possibility.

"[The] AUD/USD looks to be at some risk of testing the 0.7000 level one side or other of year-end," he says.

Kyle Rodda of IG Markets is another who says the AUD/USD could fall below 70 cents in the near-term.

"As fears build about the strength of the Australian economy, and greater volatility in global markets leads to diminishing risk appetite, an AUD/USD exchange rate with a 6 in front of it at some point this week is becoming a stronger possibility," he says.

With Japanese markets closed, many investors already on holidays and little on the economic data calendar on Monday, whether this happens or not will likely be determined by headlines and continued tweaks to market positioning.

The performance of Chinese financial markets, particularly the Chinese yuan, appears the most likely catalyst to dictate the direction of the Aussie dollar today.