President Trump spoke today regarding the Iranian missile attack on US airbases in Iraq overnight. The President confirmed what many in the market already knew: there was minimal damage and no lives were lost. President Trump also did his best to extend a peace offering to Iran, saying that the US does not want war, but rather peace. As a result, optimistic, but cautious, markets felt they were given the green light to continue to buy stocks. S&P 500 futures are closing in on the all-time highs of 3263.5.
Source, Tradingview, CME, City Index
As a result of the risk-on move in stocks, USD/JPY followed suit. The pair is up .65% on the day, however it is also up 150 pips off its lows. The daily candlestick shows an extremely bullish outside day candle, as it shot higher through the 200-day moving average near 108.64. This level had capped the market the previous 3 days.
Source, Tradingview, City Index
Technically, on a daily timeframe, we have looked at USD/JPY a few difference ways over the last few months. First, we viewed it as a failed inverted head and shoulders pattern, as it briefly broke through the neckline near 109.50, but failed to hold above it. Next, we looked at as a failure to break through the 61.8% Fibonacci retracement level from the highs on April 3rd to the lows on August 26th near 109.36. Finally (and this may still be the case), we viewed it as a rising wedge of the lows, which broke lower out of the wedge on December 30th. The retracement a rising wedge is 100% of the wedge, which would target near 104.50.
On a 240-minute timeframe, we can see that the pair fell below a rising trendline from early November, only hold support at the 38.2% Fibonacci retracement level from the August 23rd low to the November 29th highs at 107.70. This shallow retracement allowed for price to rebound back through the rising trendline today. USD/JPY is currently holding just below horizontal resistance near 109.15. There are multiple resistance areas between 109.35 and 109.70, including the rising trendline on the daily and the band of resistance from previous levels. Support comes in at the 200-day moving average of 108.64, horizontal support hear 108.25 and overnight lows just below 107.70.
Source, Tradingview, City Index
With the force of today’s risk-on move, don’t be surprised if USD/JPY breaks higher (with stocks) through the 109.50/70. Bears will look to sell near these levels with stops above. Bulls will look to buy on dips, while keeping an eye on the gap (on the daily) from early May between 110.90/111.00, especially if there is de-escalation between the US and Iran in the Middle East. This would also negate the rising wedge discussed earlier.
From time to time, GAIN Capital Australia Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.
As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.