USD/JPY testing the key resistance zone in the upper 109.00's again
There really is no way to measure how risk appetite can return and to what levels this may play out in the markets, but judging by the rebound in USD/JPY, we can see that markets are ready to downplay any negative developments in the geopolitical arena and pick up on risk assets quickly.
As is now widely acknowledged, both the US and Iran have issued more peaceful rhetoric, with the US saying there few consequences to the Iranian retaliation, while Iran insists it has avenged the death of one of its top military generals.
Along with this, the House of Representatives has also voted to limit the powers of President Trump, in a move designed to avoid any more surprise military moves against Iran which could reignite tensions in the area.
This combination of developments have gone a long way to placate markets, and with US stock markets testing for new record highs once again, USD/JPY has responded in kind and is pushing for a move towards 110.00 once more. As we have seen in previous weeks, this area is thick with selling interest, so despite the positive mood, it will take further gains in the equity markets to sustain the up-move in the spot rate, which is challenging the line of resistance at 109.50-60.
If we do manage to push above here, we suspect 110.00-50 will also be a very tough area to overcome.