EUR/JPY bulls back in play within rising channel, seeking test of key resistance

• EUR/JPY moves back to test the 200-DMA following Trump's address over Iran. 
• Bulls look for a correction within ascending channel and break of Fibonacci resistance at 122.63.

EUR/JPY has found support at the base of a rising channel following a rally in risk appetite on the back of a de-escalation of the crisis in the Persian Gulf. EUR/JPY rallied from the lows of 120.17 to a high of 121.38 to test back through the 200-day moving average. 

US President Donald Trump responded to Iran's missile attack in his speech delivered today at 11.30 ET. The President cautioned Iran through over the US economic and military power, calling for peace between the two nations. However, Trump was adamant that Iran will not have nuclear weapons and laid down the foundations for further sanctions in retaliation to the missile attacks that caused no US casualties. We thus saw a rebound in equities and such safe-haven asset classes such as gold and the yen dropped. Subsequently, EUR/JPY rallied to pre-attack levels.

Iran will never be allowed to have a nuclear weapon

Trump said in his opening address, “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."Foreign Minister Javad Zarif said Iran does "not seek an escalation of war, but will defend ourselves against any aggression" – The markets will now look to see how the regime responds to additional sanctions and whether they will be considered aggression?

EUR/JPY levels

With the price rising in an ascending channel to the 200-Day moving average, analysts at Commerzbank note that EUR/JPY’s four-month uptrend has seen only a minor erosion but the market stays on the defensive.

"It has failed for the past four weeks at Fibonacci resistance at 122.63 (the 61.8% retracement of the move down from the April 2019 peak). While capped by 122.65(December 2019 high) we will assume a negative bias is entrenched. The recent low at 120.17 needs to give way for us to refocus attention on the 119.26 mid-November low."