During the Asian session on Wednesday, the yen paired with the dollar updated a 3-month low, dropping to the middle of the 107th figure. Another escalation of the Iran-US conflict overshadowed all other fundamental factors - protective instruments began to be in high demand again. Gold was especially strong. This asset has risen in price to almost 7-year highs, reflecting the panic of investors. At the same time, the Japanese currency showed a similar dynamics, however, the growth of the yen was more restrained.
The situation in the currency exchange market had changed a little by morning - anti-risk sentiment had fallen, the dollar, paired with the yen, had practically made up for lost positions. Initial reports by the American press that the US was on the verge of a full-scale war with Iran were refuted by the White House, after which traders redefined their attitude to protective assets. In general, judging by the comments of numerous political observers, it can be assumed that the US-Iran conflict will show signs of de-escalation, after the events of this night. However, first things first.
It all started with the fact that Iran attacked US military bases in Iraq. In particular, at least nine missiles were fired at one of the air bases. Tehran announced the "complete destruction" of a military facility as a result of an Iranian air raid. The attack was called an "act of retaliation" for the assassination of General Qassem Soleimani. After this attack, the American television channel, CNN, published news that Donald Trump is "preparing an appeal to the nation", during which he can announce the start of full-scale hostilities against Iran. It was after this message that protective assets rose in price - the financial world was preparing for a big war. However, subsequent events have reduced the probability of this scenario.
First, the White House has denied reports that Trump is preparing to appeal to the nation. Moreover, CNN journalists were criticized in the presidential administration, accusing them of spreading false information, thereby provoking panic. According to the press service of the head of state, Trump is not going to and was not going to do such actions. A little later, the reaction of the president himself appeared. In his short tweet, he wrote that "everything is fine." Literally, his comment is: "So far so good!" "We have the most powerful and well-equipped military anywhere in the world, no doubt!" Trump also promised to make a more detailed official statement in the near future.
Later, comments from the representatives of Congress appeared. In particular, the speaker of the US House of Representatives, Nancy Pelosi (Trump's most ardent opponent), demanded that the White House administration "stop the provocations against Iran." According to her, Washington, "like the whole world," cannot afford a full-blown military conflict. At the same time, the States, according to Pelosi, must ensure the safety of their troops. Such a restrained reaction of the head of the Lower House of Congress reassured investors - panic mood gradually subsided. By the way, Pelosi said earlier that a resolution would be submitted to the House of Representatives before the end of the week to limit the powers of the US president to conduct military operations against Iran. But here, it's worth noting that the Lower Congressional Board is controlled by the Democrats, while the Upper House - the Senate - is controlled by Republicans. Many of Trump's party members have already expressed support for Trump's actions against Iran, so the above resolution is unlikely to be approved by senators.
Thus, the likelihood of a full-scale war between the countries is now quite small despite the rocket attack on US military bases. In addition, traders should pay attention to the comments of Iranian Foreign Minister Mohammad Javad Zarif. He called the strike on US military bases "a proportional response after the assassination of Qassem Soleimani." According to the Iranian Foreign Minister, "Tehran does not want war," although it is ready to defend itself against any aggression.
According to some analysts, the fact that Iran considers its consequences to be "proportionate" is a positive signal in the context of the prospects for the development of the situation. If Washington does not follow a military response, the situation will gradually smooth out, and the conflict between the countries will most likely move to the economic plane (the States may increase sanctions). It is also worth noting here that Iran has changed its mind about withdrawing from the "nuclear agreement", despite the fact that Tehran has reduced its obligations under this agreement.
In general, a lot depends on the position of the White House now. Trump promised to make a more expanded statement on recent events (most likely, the statement will be released during the American session on Wednesday). If Washington demonstrates a restrained position, the anti-risk sentiment will finally not succeed - at least in the short term. In this case, the USD/JPY pair can jump to the middle line of the Bollinger Bands indicator on the daily chart, which corresponds to the "round" level of 109.00. On the other hand, if Trump decides on any specific military steps, the pair will return to the reached price lows, that is, in the middle of the 107th figure.
