FX Daily Strategy: Asia, April 17th
Geopolitical Picture Still Unclear
USD/JPY Consolidating, but room for lower later
AUD/USD New YTD high
Figure: Iran/Iraq Tanker War 1987-88
| Incident | Comments | |
| USS Stark | May 17 1987 Iraq aircraft attacks USS Stark by mistake | 29 U.S. servicemen killed. Ship has severe list, but avoided sinking and sails to Bahrain. Iraq apologises as they thought it was an Iranian ship. |
| Bridgeton oil tanker | July 24 1987 oil tanker hit by Iran contact mine | Modest damage to huge tanker, but U.S. Navy ships had to follow Bridgeton into Kuwait due to risk of other mines. |
| USS Samuel Roberts | April 18 1988 Iran contact mine hits US frigate | 10 U.S. serviceman injured. Ship keel snapped, but did not sink due to emergency repair work. U.S. launches retaliation attack on Iranian gulf oil platforms 4 days later. |
Source: US Navy/Continuum Economics
Though the U.S. is introducing a blockade on Iran oil exports, we think the U.S. and Iran remain reluctant to restart the war. Even when Trump and Vance are signaling positive outcome, it is worth visiting scenarios where talks fail as Iran's nuclear ambitions and the volatile status of the Strait of Hormuz remain critical points of contention.
Could the U.S. navy reopen the straits soley? The U.S. minesweeping capabilities is in transition with 4 older minesweepers in Japan and 3 new littoral assault ships with minesweeping capabilities. This is one reason why Trump is furious that European allies will not use their minesweepers in the Gulf until the war is over. It could thus be difficult for the U.S. acting alone to quickly force a reopening of the Straits of Hormuz without some Iranian cooperation.
Iran could choose to respond by attacking Gulf energy installations before or after the 2-week ceasefire ends on April 22. It could also ask the Houthis to join and stop shipping in the Red Sea. Alternatively, Iran could seek a path to deescalate, such as not hitting back/extending the ceasefire or a goodwill gesture of allow some shipping through the Straits of Hormuz/setting tolls for all ships to pass through the Straits.
If geopolitical picture eases as Trump and Vance indicate, USD will likely rotates lower on less haven bids. Yet, more maybe needed to see a stronger correction in USD/JPY, such as strong risk aversion. Still, the pair will head lower once geopolitical tension fades into the background.
On the chart, there is little change as prices extend consolidation at the 158.60 low following rejection from the 160.00 figure. Negative daily studies suggest this giving way to renewed selling pressure later and lower will see room to retest strong support at the 158.27/158.00 lows. Below this will expose strong support at 157.50 low of 19 March to retest. Break here will confirm a top in place at the 160.46 high and see room for deeper pullback to retrace gains from the January low. Meanwhile, resistance at the 159.00/45 congestion and January high expected to cap and sustain bearish pressure from 160.00/46 highs.
The Aussie is well supported by stronger risk sentiment and solid precious metal. The previous YTD high has been broken and looks like the Aussie will be searching for new grounds.
On the chart, a break here will see room to extend the underlying bull trend from the April 2025 year low and further retrace losses from the 2021 year high to .7210, 61.8% Fibonacci retracement. Meanwhile, support at the .7100 level should underpin. Below this will open up room for deeper pullback and see consolidation to the .7050/.7000 area.