US Kills Top Iranian General
Global investor risk appetite was shaken last week on reports that the US had killed a top Iranian general during a drone strike carried out in Baghdad on Friday. Qassem Soleimani, a top Iranian general was confirmed to have been killed during the drone strike. Risk assets across the globe were immediately lower on Friday in response to news of the strike which is feared to have increased the likelihood of military conflict between the US and Iran.
Iran Vows Revenge
The initial response from Iran has been one of widespread anger. The Iranian president warned that the country will take swift revenge against America for the killing of Soleimani, who was a war hero in Iran. At Soleimani’s funeral on Monday, massive crowds gathered in Tehran, chanting “death to America” while leaders gave speeches filled with aggressive rhetoric. Overnight, reports of a missile attack on a US army base in Iraq rocked the markets sending equities sharply lower.
Trump Warns Of Further Airstrikes
President Trump cautioned that any aggression from Iran would be met with firm action from the US. Trump warned that airstrikes would be activated on up to 52 key sites within Iran. However, following the attack overnight, Trump has refrained from returning action and has so far said that "all is well", leading hopes that the two sides will avoid a full conflict.
Iraq Votes To Expel US Troops
Give the unified level of anger within Iran, demonstrated by the huge crowds which gathered in Tehran on Monday (biggest public gathering in thirty years) the threat of a response from Iran remains high. The US has reportedly sent a further 3000 troops to the Middle East to help defend US assets there. However, over the weekend Iraq voted to expel US troops in light of the dangers posed by US/Iranian conflict though the US has so far said that it is not pulling out of the country.
Oil Higher on US-Iran War Fears
Oil prices were firmly higher on Friday too as fears of a fresh military conflict in the Middle East sparked expectations of supply disruptions. Many economists have warned that a full-scale war between the two nations could see oil fly above $150 per barrel. For now, however, crude oil prices have fallen back somewhat as traders await fresh updates on the situation, allowing some of the initial knee-jerk reaction to pass.
Trump has come under heavy criticism from politicians across the political divide in the US. The attack was deemed reckless and unnecessary and the former head of the CIA has warned that terror attacks on US soil are now highly likely.
Given the fragile nature of the situation, the impact on markets means that risks remain tilted to the downside for equities and risk assets with safe havens likely to benefit in the near term. The market will be watching closely to see how the story develops and traders remain wary of the risks that equities markets could suddenly drop in response to any breaking news on the topic.
Technical View
USDCHF (Bearish, below .9775)
From a technical viewpoint. USDCHF is testing the 2019 lows which, for now, are holding as support. With longer term VWAP negative and with price still under the monthly pivot at .9775, a break of the level is likely with the monthly S1 at .9541 the next level to monitor.
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Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
Past performance is not indicative of future results.
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!