Markets recover after being roiled by Geopolitical tensions

Summary:

• Clear risk-off moves after Iran retaliates

• Initial moves pared however

• Boeing to drop after Tehran crash 

There were some wild swings in the markets overnight after Iran carried out its retaliation for the US attacks last week. More than a dozen ballistic missiles were aimed at US forces in Iraq in the first military move against Washington since the killing of Qassem Soleimani. Oil prices jumped with brent crude moving above its recent peak to trade close to the $71 handle while Gold prices surged above the $1600/oz mark to hit levels not seen since Q1 2013. US stock futures tumbled by more than 1.5% as a clear risk-off mood gripped the markets. 

However, these moves were subsequently pared and this has become a recurring theme in recent sessions as the initial knee jerk reaction faded back. The rationale for this seems to be that despite the clear escalation in US-Iranian tensions over the past week traders are still of the belief that things won’t get as bad as many have feared. Defence minister, Amir Hatami, has said that the response will be proportional and it is perhaps telling that the attacks seem to have been directed as to not cause maximum damage. We still await a detailed response from Trump, but his initial reaction on Twitter with a post that began with “All is well” suggests that the retaliation may not have further angered the US president. 

While the markets remain on tenterhooks, fearful of any further escalation, there is a growing feeling that the latest events could have signalled a high-water mark in tensions between Tehran and Washington and hopefully the situation will not flare up any further. 

Risk off moves were seen in USDJPY (Green/Red candles) and the TNOTE (Blue/Transparent candles) as Iran launched the retaliatory attacks. However, both these markets have since pared the moves to trade back near where the were before the news broke. Source: xStation 

USDJPY is forming a large bullish hammer on D1 as the market looks to recover after being rocked by the latest tensions in the Middle East. Source: xStation