GLOBAL POLITICAL RISK: Trump Reiterates Iran War Should End Soon

The AUD/JPY range overnight was 112.39-113.08, Asia is currently trading around 112.95. The pair drifted back toward the 113.00 area where it has stalled for now. Technically the trend remains strongly up, and the pair has traded very well considering the negative risk sentiment from geopolitics for the moment. The inability for the Yen to bounce in the crosses during this period of upheaval has been telling. On the day, look to see if this 113.00 continues to cap price, a sustained move back above here and price will be looking toward the recent highs toward 114 again. The bulls will continue to be around on dips as they continue to hold sway while the pair trades above 109.00-110.00. The first buy zone is back toward 111.50-112.00, and then the 110.00 area.

• The AUD/JPY Average True Range(ATR) for the last 10 Trading days: 104 Points

Fig 1: AUD/JPY spot Daily Chart

Source: MNI - Market News/Bloomberg Finance L.P

The market is debating the obvious question of how long can global markets continue without any financial incident while the Straits of Hormuz remain shut. For the moment the market is looking at the situation positively and believes should Trump get ships moving through the Straits everything should all be alright. There is some debate out there by people more in the know than me that suggest it is not so simple. Below is a couple of articles that run through some of the risks, if you are interested.

• Craig Tindale wrote an article. Systemic Risk: A 12-Order Cascading analysis of a Zero-Flow Strait of Hormuz Closure. It is long but gives a great breakdown on the risks of an extended closure. Below are a few excerpts. https://x.com/ctindale/status/2029303885505155571?s=20
• “The modern world order, having organized itself around efficiency, cost minimization, and logistical precision, has created a machinery of dependence so extreme that the interruption of one narrow corridor can propagate outward into a general crisis of civilization.”
• “What appears at first as a maritime blockade is in fact the exposure of the entire global system as a hierarchy of brittle interdependencies. Oil and LNG  fail as inputs into electricity, fertilizer, shipping, chemicals, mining, manufacturing, and state finance.”
• Matt Fernley a Mining Equity Strategist believes even if the Straits are opened tomorrow the risk is it takes several weeks or even months to the supply chains re-established. Below are a few excerpts.  https://x.com/matt_fernley/status/2033852328776782155?s=20
• “I think the most dangerous thing that I see in markets currently is this assumption that, as soon as the war ends, commodity production will just switch back on again. It won’t. It can’t.”
• “So this assumption the market’s making that, as soon as peace breaks out, everything will go back to normal is very dangerous. Supply disruption is into its third week now. Even if the war stopped tomorrow, it would be several months before supply of many of these commodities will be re-established. And that’s simply not being priced into commodity prices or economic expectations, in my view.”

• MNI: JAPAN FEB EXPORTS +X.X% Y/Y; JAN +16.8%
• JAPAN FEB EXPORTS POST 6TH STRAIGHT Y/Y RISE