North Korea’s nuclear test on Sunday surprised many, including political leaders on both sides of the Pacific.

The test – which registered as a magnitude 6.3 earthquake – is set to test the White House’s tolerance of the prospect of a nuclear threat. President Trump responded via twitter: ‘the US is considering … stopping all trade with any country doing business with North Korea’, pressuring countries including China and India to reduce trade with the ‘rogue nation’, as he described it. 

More sanctions are likely to be on the table in the weeks to come, but the damage is irreversible. North Korea’s military actions over the last two months have become a severe threat to the region’s security, presenting a growing challenge to US hopes of pursuing a diplomatic solution to the nuclear tension.   

Geopolitical tension is set to dominate market sentiment and trading today. Equity markets responded negatively towards the nuclear test, with most Asian equities opening in red and the US equity futures trading nearly 0.5% lower at the time of writing. Funds are fleeing to safe-haven assets, with gold surging to a 12-month high of US$1,335 this morning, and the Japanese yen strengthening nearly 0.5% against the greenback. 

In Singapore, the Straits Times Index lost 16 points or 0.5% this morning, mainly due to the geopolitical headwinds. The local shares market is lacking fresh catalysts after second-quarter earnings. Therefore, external factors such as US economic data, geopolitical issues and crude oil prices are going to dominate the movements in local share markets in the short term. Technically, the Straits Times Index is trading in a consolidation phase, with its immediate support and resistance levels at 3,240 and 3,300 points respectively. 

Technical Analysis:

Gold - Cash

  • Breakout key resistance level of 1,295 (triple-top) and about to test the 100% Fibonacci extension level at 1,336
  • 10-Day Simple Moving Average sloped upwards
  • SuperTrend (10,1.5) is sloped upwards, suggesting the uptrend is intact
  • Momentum indicator MACD remains in a bullish setup and is forming higher highs, indicating strong upward momentum

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