USD/JPY consolidates below the 23.6% Fib, eyes on geopolitical risks

  • USD/JPY is slipping in Asia as markets remain cautious over the Iran news.
  • USD/JPY is currently trading at 108.37, between a range of 108.26 and 108.40.

USD/JPY had been trading in response to the US stock market's resilience in the face of the suspected attack on two oil tankers, off the coast of Iran near the Strait of Hormuz. USD/JPY traded between 108.23 and 108.53 overnight, currently sliding in Tokyo, down -0.03% for the Asian session so far. Overnight, the S&P 500 and DAX were both higher by 0.4%, while the FTSE 100 closed near its opening price after gains earlier in the day.

However, commodities markets were more susceptible to the risk over the escalation of tensions between Washington and Tehran; Notably, in oil price, considering the implications for supply in the area where a suspected attack on two oil tankers, off the coast of Iran near the Strait of Hormuz, was committed - Prior to the attacks, oil prices were at a five-year low. Brent rallied by 4.5%, which was the largest increase since January, also prompting a lift in energy stocks. which helped to support US benchmarks. Demand for the yen and, more so, in gold represents the concerns in other spaces as investors look to park capital in safe havens to avoid market uncertainty. Gold added to its recent gains, ending higher in NY by 0.6% to $1,341oz.

Since Trump made his statement over Twitter, following a formal address by U.S. Secretary of State Mike Pompeo who spoke just before the closing bell, blaming Iran for the attacks, saying that the U.S. would take the issue to the U.N. Security Council, warning Iran that the U.S. "will defend our forces.," Iran has responded and denied the attacks. 

"It is the assessment of the U.S. government that Iran is responsible for today's attacks in the Gulf of Oman...." - President Trump tweeted. 

Valeria Bednarik, the Chief Analyst at FXStreet, explained that from a technical perspective, the short-term view remains slightly bearish, with 4-hour indicators showing negative slopes below their midlines and price just below the 20-SMA:

"The bearish tone is stronger in daily charts while USD/JPY consolidates below the 23.6% Fibo retracement of the 112.40/107.81 fall. A break above the 108.90/109.00 area, where the Fibo converges with a descending 20-day SMA could improve the short term perspective, although only a break above 110.50 would be constructive for the pair. On the downside, loss of the 107.75/80 support zone would pave the way to further declines, with 107.50 and 107.00 as next targets."

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