- USD/JPY responds to the fresh risk of the US-Iran war, the pair ignored broad USD strength the previous day.
- Political headlines will be the key drivers ahead of the US session.
USD/JPY drops to 108.00, with a low of 107.83, near to Wednesday’s Tokyo open. Unlike the rest, the pair had to shrug off the US dollar strength on Tuesday as markets feared the US-Iran war even if no actual actions have taken place.
US-Iran drama back in action….
After a few days of inaction, Iran is taking revenge on the US killing of its top military official Qasem Soleimani as it attacked the Trump administration’s facility in Iraq.
Read: Breaking: Risk-off as Iran retaliates, US forces in Iraq are under “missile attack from Iran”
With this, the market’s risk tone recently weakened with the US 10-year treasury yields slipping more than seven pips to 1.75% whereas the S&P 500 Futures losing more than 1% to 3,200 by the press time.
Earlier, the pair paid less attention to the US Defense Secretary Mark Esper’s signal that the US wants to see the situation with Iran de-escalated. The reason being harsh comments from the US President and Iranian wires keep the global traders afraid.
In doing so, the pair ignored upbeat data from the US as well as a slight recovery in the US 10-year treasury yields.
Traders will now keep eyes on further developments surrounding the US-Iran tension for fresh direction. On the economic front, Japan’s Consumer Confidence for December and the US ADP Employment Change, an early signal to Friday’s NFP, will be the keys to watch.
Technical Analysis
A 200-day SMA level of 108.62 acts as immediate key resistance that gradually grinds the pair lower towards the 107.50/45 region.
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