Trump Threatens Further Airstrikes if Iran Retaliates

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Troops Sent to Middle East

The situation between the US and Iran is looking even more precarious this week.

Iran has threatened to take revenge on the US for its assassination of a top Iranian general. In response, the US has sent over 3000 extra troops to key sites in the Middle East.

The killing of Iranian general Soleimani last week was personally ordered by the US president. And it has sparked a significant political backlash against Trump.

Many figures across the political divide, as well as former intelligence officers, have warned that the reckless move risks almost certain retaliation from Iran.

Trump Threatens Iran Again

However, at present, there is a strategic standoff. This comes as a result of Trump’s personal threat that, should Iran enact any retaliation against the US, he is prepared to activate airstrikes on up to 52 targets within Iran.

Speaking to reporters over the weekend, Trump said:

“They’re allowed to kill our people and we’re not allowed to touch their cultural sites? It doesn’t work that way.”

“Death to America”

On Monday, Iran held a state funeral for the slain general. In Tehran, mammoth crows turned out to mourn his death.

The public gathering is said to be the largest once seen in the capital since the death of Ayatollah Khomeini thirty years ago. The speeches made during the day’s mourning marked a significant uptick in aggressive rhetoric from Iran.

Soleimani’s own daughter addressed crowds as they chanted “death to America.” She stated:

“The families of the American soldiers in western Asia… will spend their days waiting for the death of their children.”

The reaction in the markets has been one of concern. Late last week, in response to news of the airstrike, the SPX500 quickly shed over 50 points. The index is still sitting near the bottom of the decline currently.

Similarly, USDJPY ended Friday around 70 pips lower as the Yen saw a surge in safe-haven buying.

Waiting Continues…

For now, the markets appear to be in wait-and-see mode. The threat of retaliation from Iran poses a great deal of risk to high-yielding assets. However, many are hoping that the threat of further action from Trump will be enough to deter Iran from following through on these threats.

Technical Perspective

USDJPY

The rising wedge formation which has framed price action in USDJPY over the last six months has now broken, following the sharp reversal lower from the 109.69 level. Price is currently sitting on the 107.89 support, though looks vulnerable to further losses. If we do break below the level, focus will be on a test of the 106.75 support next.

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