AUD/JPY corrects to test rising wedge prior support, bears seek deeper run towards 72 the figure

• AUD/JPY snaps back on geopolitical fundamentals following Trump's address of missile attacks.
• AUD/JPY bears looking for a deeper move below the rising wedge formation.

AUD/JPY is currently trading around 75 the figure having travelled within a range of between 73.75 and 75.04 following a 0.83% upside move on the back of a return to risk-on markets in the US session. 

US President Donald Trump followed-up his Tweet from overnight with a well-balanced response to Iran's missile attack in his speech delivered today at 11.30 ET. Trump was able to caution Iran diplomatically through the might of the US economic and military power while, at the same time, call for peace between the two nations and the world. This lead to an extension of corrections in asset classes such as oil and gold, as well as the yen, resulting in a full reversal of the risk-off moves witnessed at the time of the attacks in yesterday's early Asian session. Subsequently, AUD/JPY bears were quick to take profits and the price moved from a low of 73.75 to a high of 75.06.

Sanctions to come, will they be considered an 'aggression' by Iran? 

However, Trump will not let Iran off lightly and stated that further economic sanctions will be imposed on an already heavily sanctioned and economically crippled Iran. Markets are waiting to hear what those sanctions will be, but they will be designed to deter Iran from developing nuclear weapons.

“As long as I am the president of the United States, Iran will never be allowed to have a nuclear weapon,” Trump said. “The United States is ready to embrace peace with all who seek it,” but, "Iran must abandon its nuclear ambitions, end support for terrorism." Trump has called on "Europe, China, Russia and other countries," to "break away from Iran nuclear deal."

Iran will not take kindly to the sanctions and this may not be the last of this for the immediate future. Iran's supreme leader called his country's missile strike a "slap" to the Americans but proclaimed that Iran's real revenge will be forcing the U.S. to pull out of the region.

Foreign Minister Javad Zarif said Iran does "not seek an escalation of war, but will defend ourselves against any aggression" – are sanctions to be considered aggression?

AUD/JPY levels

The breach of the 200-day moving average where it meets the 23.6% Fibonacci retracement of the range since Aug 2019 as first support lead to a sell-off to the 74 handle and a touch below it in the vicinity of the June lows and confluence of the 38.2% Fibonacci (range since Aug 2019 – 2019 trendline resistance/turns support). A bullish correction, from this juncture, will open 76 the figure, 76.20 and 77.20/50 and the 21-month moving average as the summit of the rising wedge formation. However, on further escalations, a greater support barrier (since GFC 2009) comes in at the 61.8% Fibonacci (range since Aug 2019) between 72 the figure and 72.50.