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James Hyerczyk

The Dollar/Yen is trading lower on Friday, hitting its lowest level since November 4, amid escalating tensions in the Middle East. Traders are aggressively shedding risky assets and moving money in the safe-haven Japanese Yen after a U.S. air strike on the Baghdad airport killed an Iranian military commander.

Reuters is reporting that Iranian Major-General Qassem Soleimani and Iraqi militia commander Abu Mahdi al-Muhandis were killed in the attack. The pentagon confirmed the strike, saying Soleimani was actively developing plans to attack American Diplomats in Iraq and the Middle East.

At 11:24 GMT, the USD/JPY is trading 108.075, down 0.480 or -0.43%.

We’re expecting the volatility to continue with Iran vowing to retaliate after the aggressive action by the U.S. military. Iranian Foreign Minister Mohammed Javad Zarif warned Friday that the targeted killing of Soleimani was “extremely dangerous & a foolish escalation.”

“The U.S. bears responsibility for all consequences of its rogue adventurism,” Zarif said on Twitter.


Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The trend turned down when sellers took out the previous main bottom at 108.471. It was reaffirmed when main bottoms at 108.430 and 108.280 were also taken out. The next main bottom target is 107.891.

The USD/JPY is also trading on the weak side of a series of retracement levels at 108.317, 108.434, 108.833 and 109.371. The four levels are potential resistance.


Daily Swing Chart Technical Forecast

The price behavior today is being controlled by momentum. We’re also in a news driven market. Furthermore, early indications are the theme of the day will be “risk-off”.

Bearish Scenario

A sustained move under the main bottom at 107.891 will indicate the selling pressure is increasing. Taking out this level could trigger an acceleration to the downside with the next major target the October 3 bottom at 106.485.

Bullish Scenario

Overcoming the retracement levels at 108.317 and 108.434 will indicate the selling is getting weaker and the counter-trend buying stronger. Turning higher for the session will put the USD/JPY in a position to form a potentially bullish closing price reversal bottom.

This chart pattern won’t change the trend to up, but if confirmed, it could trigger a 2 to 3 counter-trend rally.

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