With the recent oil tankers’ blast in the Gulf of Oman fueling concerning of the US-Iran was, Reuters came out with a news report quoting the US military that said the US has no interest in engaging in a new conflict in the Middle East but will defend American interests including freedom of navigation.

The news report further said that the US Central Command said in a statement the destroyer USS Mason was en route to the scene of the attacks that damaged two tankers in the Gulf of Oman earlier in the day.

Key comments from the US Central Command by a spokesman Lieutenant Colonel Earl Brown:

  • The US and our partners in the region will take all necessary measures to defend ourselves and our interests.
  • Today’s attacks are a clear threat to international freedom of navigation and freedom of commerce.
  • We have no interest in engaging in a new conflict in the Middle East.
  • We will defend our interests, but a war with Iran is not in our strategic interest, nor in the best interest of the international community.
  • USD/CAD capped on upside reversal below the major ascending channel.
  • Eyes on the price of oil and Iran/US relations.

It has been a bare week on the calendar for the Canadian dollar apart from a handful of housing data. There was an improvement in housing starts and building permits and an inline housing price index. Markets have noted that the BoC has dropped their hawkish bias, maintaining a bias a focus on household spending, oil markets, and global trade uncertainty.

However, in the recent session's the Funds has dropped in the lead into the Fed next week, following a dismal U.S. Nonfarm Payrolls, a more solid Canadian jobs report and then a disappointment in U.S. CPI hammered the nail in the coffin down to 1.3238. There has been a focus back to trade this week as well as geopolitics following the Iranian noise, following reports of a tanker incident in the Gulf of Oman off the Iran coast which lead to a response from President Trump tweeting, "It is the assessment of the U.S. government that Iran is responsible for today's attacks in the Gulf of Oman…." and U.S. Secretary of State Mike Pompeo, who addressed the nation just before the closing bell, blamed Iran for the attacks and said the U.S. would take the issue to the U.N. Security Council, warning Iran that the U.S. "will defend our forces."

Subsequently, the price of oil has been back on the offensive which has seen a mixed response in the Loonie, initially rising vs the dollar to 1.3301 the overnight low, before dropping back vs the greenback to current levels at 1.3327 ahead of the Tokyo open.

"This increases the tension that has been building in recent months on various fronts in the Middle East, as well as raising the spectre of military action and the prospect of disruptions to oil trade in the region. This latest issue sets the stage for a tense meeting when OPEC members gather in Vienna later this month," analysts at TD Securities explained, adding, "The lack of a confirmed date suggests tension bubbling away between Saudi Arabia and Iran. Amid all this, OPEC’s monthly oil report showed lower estimates for demand. It said international trade tensions were already hurting demand. However, it still expects a tight market in the H2 2019 to cut inventories."

USD/CAD levels

The price has been rejected just below the rising channel's prior support line and has moved into a consolidation while the 4HR stochastics has moved out of overbought territory and price touching the hourly rising support line twice, capped at around 1.3345. The 200-D EMA has been relatively supportive on the downside at 1.3270 meeting 17th April lows. 1.3070 marks the 2019 lows.

Having failed to receive the required 15 votes to remain in the race to the UK’s PM, Tory candidate Andrea Leadsom was on wires, via Times, during early Friday.

She mentions that she could back another candidate Sajid Javid who’s still in the race with 23 votes.

It should be noted that ex-Foreign Minister Boris Johnson leads the run with 114 votes during Thursday’s first round of poll.

Two more rounds of voting will take place starting from next to decide who will be the next Prime Minister of the UK.

  • Failure to successfully cross the key resistance triggered the pair’s pullback from the month’s high.
  • 61.8% Fibonacci retracement and two-month-old support-line are on the sellers’ radar.

Failure to hold the break of 4H 200MA and 50% Fibonacci retracement propelled, presently pulls the USD/IDR pair towards 61.8% Fibonacci retracement as the quote is taking the rounds to 14,280 during initial Friday.

Should prices slide beneath 61.8% Fibonacci retracement of its April month upside near 14,260, an ascending trend-line stretched since mid-April at 14,198 seems the key support to watch.

In a case where the pair drops under 14,198, current month low surrounding 14,155, 14,050 and 14,000 could become bears’ favorites.

On the contrary, 50% Fibonacci retracement and 200-bar moving average (4H 200MA), near 14,345, seems a tough upside resistance as sustained trading beyond the same can propel prices to multiple highs marked by the end of May 30 surrounding 14,410 and then to 38.2% Fibonacci retracement at 14,434.

If buyers ignore overbought levels of 14-bar relative strength index (RSI) and fuel prices beyond 14,434, 14,475 and a month-long descending trend-line near 14,525 could flash on their radar.

USD/IDR 4-Hour chart

Trend: Pullback expected

Japan’s Economic Minister Toshimitsu Motegi is on wires, via Reuters, while paying a trade-related visit to the US. Mr. Motegi meets the US Trade Representative Robert Lighthizer while being positive about future trade relation and with expectations of another meet before G20.

Key points

  • Exchanged views on trade candidly on USTR’s Lighthizer.
  • Will probably hold meeting with USTR Lighthizer before G20 summit in Osaka this month
  • Think Japan, US deepened understanding over each other’s position over trade issue

The Iranian mission to United Nations says that Iran says it categorically rejects "u.s. unfounded claim" regarding Gulf of Oman tanker attacks.

This is in response to President Trump tweeting, "It is the assessment of the U.S. government that Iran is responsible for today's attacks in the Gulf of Oman…." following when the U.S. Secretary of State Mike Pompeo, who addressed the nation just before the closing bell, blamed Iran for the attacks and said the U.S. would take the issue to the U.N. Security Council, warning Iran that the U.S. "will defend our forces."

  • UK Foreign Minister: UK will be making its own assessment – BBC

  • Iran: US military response is not ruled out

While the US has already claimed that it has proofs of Iran’s hand behind two oil tankers’ blast in the Gulf of Oman, the UK Foreign office recently agreed with the doubts as per the source of the BBC reporter.

Early Friday, BBC reporter cited sources from the British Foreign office while tweeting that the UK government agrees with the US judgment that Iran was responsible for attacks on 2 oil tankers in the Gulf of Oman.

Various global leaders have recently been worried about the incident and media was on fire after the blast.

Some of the headlines are quoted here: Iran: US military response is not ruled out

Oil prices showed little reaction to the tweet as Reuters reports that the British Foreign Office had no immediate comment.