Markets in Asia were spooked overnight after North Korea launched a missile over Japan.
Tensions have been running high for a number of weeks now in relation to North Korea, and this move has sent traders running for cover. The situation surrounding North Korea has become more serious now, and we are seeing a risk-off strategy being adopted by traders.
There was a knee-jerk reaction to the missile being launched, but after a while traders nerves settled, and we saw a bounce back in equity markets – which are off the lows of the session.
The Japanese Prime Minister, Shinzo Abe, and Donald Trump vowed to ramp-up pressure on North Koreas in light of the missile being fired.
Gold hit a new nine month high on the back of the missile being fired by North Korea. The metal spend a lot of time in 2017 being trapped in a range between the low $1200’s and just shy of $1300, and now that is has made a clear break beyond the range we could see further gains.
Oil finished lower last night after Hurricane Harvey was downgraded to a tropical storm. Unfortunately damage and destruction was left in its wake, and as far as the markets were concerned, it wasn’t as severe as pencilled in. It was a textbook example of the market being too fearful going into the weekend. The flooding due to heavy rain will pose problems for the US government, as the clean-up will be costly
Traders are looking ahead to Donald Trump’s speech on Wednesday, where is he going to talk about bringing in tax reform, and investors are certainly in favour of the President’s pro-business policies, but will the plans get introduced. Mr Trump failed to overhaul the healthcare system, and it wasn’t just the Democrats who scuppered his pans, members of his own party opposed it too.
What benefits the President, is that tax reform is the sort of policy that you could imagine support coming from both parties.
Keeping with US politics, the debt ceiling is looming and Mr Trump as already warned the US government that is risks being shut down if it can’t find the funds to build the wall along the Mexican border. The timing of Hurricane Harvey is adding to the problems as Washington will have to deal with those costs too. Investors are nervous about the potential political gridlock in the US.
EUR/USD – is still in a solid upward trend, and 1.2000 is the next level to keep an eye on. A break above 1.2000, would put 1.2220 on the radar. Pullbacks may find support at 1.1916 and 1.1847.
GBP/USD – has been losing ground since the start of the month, but has bounced back in the past two sessions. A break above 1.3000 would bring the resistance at 1.3059 and 1.3164 into play. The 100-day moving average at 1.2900 is providing support, and a break below it would put 1.2777 on the radar.
EUR/GBP – is in a solid upward trend and bulls will be looking to the resistance at 0.9297. If 0.9297 is cleared, buyers will look to 0.9412. Pullbacks could find support at 0.9200, 0.9160 and 0.9100.
USD/JPY – is eyeing the support at 108.13, and a drop below it would make 107.00 the target. Rallies will run into resistance at 109.82
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Disclaimer: CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.