Yen Loses Steam as Markets Brush Off US-Iran War Scenario

Yen Loses Steam as Markets Brush Off US-Iran War Scenario
January 9, 2020


The Japanese yen, a safe-haven asset, rose against the greenback in the Asian session yesterday on the news report that Iran attacked two of the US military bases in Iraq. However, the risk-off mode waned in the European session as investors believe that the US and Iran will not enter into a full-fledged war. The USD/JPY pair’s bullish reversal was aided by weak Japanese economic data and strong US private-sector job addition data as well. In the past 24 hours, the USD/JPY pair rose from a low of 107.65 to a high of 109.60.

Iran retaliated to the killing of Major General Qasem Soleimani of the Islamic Revolutionary Guard Corps (IRGC), which operates directly under the ruler Ayatollah. Markets cooled down after news reports indicated that the attack did not cause any casualties.

Japan’s Ministry of Health, Labour and Welfare published the monthly labor survey for November that indicated a decline in the average cash earnings by 0.2% on a y-o-y basis, after remaining unchanged in the earlier month. The reported readings were in line with analysts’ estimates.

However, not all the economic news is bad for Japan. A report published by the Cabinet Office indicated that the Consumer Confidence Index rose to 39.1 in December, from 38.7 in the earlier month. In spite of the increase, the figure failed to meet the median forecast of 39.6.

In the US, payroll processor ADP published a report indicating a strong increase in private sector employment in December, surpassing economists’ expectations. ADP stated that private-sector job additions increased by 202,000 in December, after rising by a significantly upwardly amended 124,000 jobs in November. Economists had anticipated the private sector to add roughly 160,000 jobs in December, compared to the addition of 67,000 jobs earlier reported for November.

Commenting on the job additions, Ahu Yildirmaz, vice president and co-head of the ADP Research Institute, said, “As 2019 came to a close, we saw expanded payrolls in December. The service providers posted the largest gain since April, driven mainly by professional and business services.”

The report also stated that the service sector added 173,000 jobs, which includes 61,000 job additions by the professional and business service sectors. The trade, utilities, transportation, education, and health services sectors also recorded significant job growth, while job additions in the resort, information, and hospitality sectors inched lower.

Employment in the goods-producing sector increased by 29,000, mainly due to 37,000 job additions in the construction sector, offsetting the loss of 7,000 manufacturing jobs.

Yildirmaz pointed out that “Job creation was strong across companies of all sizes, led predominantly by midsized companies.”

While mid-sized enterprises added 88,000 jobs, employment at small and large businesses increased by 69,000 and 45,000 jobs, respectively. The weak Japanese economic data, the market’s expectation that the US-Iran conflict will not turn into a full-blown war, and better than anticipated US job additions are anticipated to keep the USD/JPY pair bullish in the short-term.

The historical price chart indicates that the USD/JPY pair is ascending after receiving support at 108.55. The next major resistance is anticipated only near 109.60. Furthermore, the oscillator of the moving average is also having a positive reading. Therefore, we are expecting the currency pair to move up in the short-term.

jpy - technical analysis - 9th Jan 2020

Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.



Janine is our editor for related stock market news. Andrew and Janine will be focusing on providing the latest trends and where the next hit could be

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