USD/JPY looks to exit range after latest Middle East update sends the markets into panic mode

Erastus Adegbotolu TradingPRO

The USDJPY has inched higher within its range after Iran claimed it fired at 2 US warships that ignored warnings near Jask Island. In another incident, the UAE Defence Ministry stated that it intercepted 3 missiles from Iran with the 4^th crashing into the sea. Already, the markets are experiencing volatility with the US dollar being the main benefactor of haven demand inflows from traders. The USDJPY which had experienced a heavy sell-off the previous week in what looked like a currency intervention will be looking to capitalize on the current escalation to curb some losses after trading sideways for the most of Monday.

A quick glance at the rate decisions from the previous week saw the Central Banks remaining cautious by leaving interest rates unchanged at the current levels but didn’t rule out future rate hikes as they expect inflation to rebound higher due to higher energy prices caused by the middle east tension. This week will be busy on the economic calendar as we already have the the Reserve Bank of Australia (RBA) hiking rates by 25bps to 4.35%, making it 3 times in a row. In addition to that, traders will also anticipate more high impact news which include ISM services PMI, JOLTS jobs openings and US Jobs report (NFP).

Oil prices rose over 2% as it reacted to the recent reports with the Brent hitting $114 per barrel. The stock markets turned lower with the SP500 dropping over -0.10% while the NASDAQ100 shed about -0.18% to 27.550. The dollar index (DXY) which tracks the US dollar strength across the market rose by +0.18% with the price now aiming for 98.600.

Technical outlook

Price is currently respecting a short term range where the Range High(Buy-Side Liquidity) sits at 157.474 and Range Low( Sell-Side Liquidity) sits at 155.587 which is just below a bearish FVG on the 1hr time frame.

Traders can anticipate a breakout in either direction. However, should the price continue to oscillate within the range, then we should expect price sweeps at the current levels with a reversal expected to follow through. In the case of a breakout to the upside as the price aims to stretch its luck considering the current fundamentals, the Bearish FVG still remains an obstacle for further rallies towards the supply zone around 160.47-160.71.

Author

Erastus Adegbotolu

TradingPRO

Forex market analyst and educator with a strong focus on technical analysis and trader psychology.

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