It would seem the tension coming from the potential conflict between the United States and North Korea did not dissipate, not even in the slightest, as most of the analysts have predicted. In fact, things are more dangerous than ever, as the Pentagon has delivered many scenarios which might occur and the one with the least negative impact is to “preemptively” strike Pyongyang, in strategic places and potential silos.
North Korea has also been busy at work as they also have laid out plans to launch 4 bombs towards Guam, particularly the American Air Base, by Mid-August as they wait for the Supreme Leader Kim Jong-un’s “Go Ahead”.
Asian Stocks did not fare so well. South Korean shares, in particular, fell to an 11-week low on Friday Morning, the Korea Composite Stock Price Index (KOSPI) was down 1.3% at 2,329.63, on track for a weekly loss of 2.7%, its biggest since June 2016. The index fell to 2,321.04 at one point, the lowest since May 24. This is Ironic as it has been one of the world’s best-performing markets this year.
In Australia, shares have dropped to a near three-week low on Friday Morning, as investors flight to safer assets was exacerbated after the rhetoric from both US and North Korea continue to flood the market place. The ASX 200 index fell 62.33 points or 1.1% to 5,698.6 and was set for its third weekly loss in four.
On the Economic Front, Reserve Bank of Australia Governor Lowe Spoke during the night saying that the RBA is ready to intervene in the AUD in ‘extreme’ situations. However, the true definition of extreme might differ from one person to another as we would have to wait and see how the RBA would define ‘extreme’ in terms of AUD appreciation.
The flight to safe assets, in particular, Gold and JPY, has forced the two instruments to higher levels. Gold has reached a high of 1,288.90 during the night, a mere 2$ away from the elusive 1,290-mark. JPY, however, also continued to strengthen against the dollar as the USDJPY pair dropped to a 108.91 2-month Low, before rising back above the influential 109-mark at the beginning of the European session.
The European Market is quiet as usual, with nothing to deliver in terms of Economic Reports or figures for the end of the week. That wouldn’t matter anyway as the focus is on the US Inflation data (CPI and Core CPI), which have been deemed very important at this juncture after the Fed has said they are waiting for the most recent inflation data. There is also the Speech that William Dudley delivered yesterday saying that inflation should rise to 2% in the medium term.
Geopolitical Tensions will not let markets rest for the moment as the volatility seems to continue to edge higher. The so called “Fear Index” has hit a multi-month high, reaching 16.04%, a level not seen since the French Elections. The focus for today will all be sent on the how the countries will react to ongoing rhetoric between the two warring nations.
EURUSD – Dollar Strength and Dollar buying are seen in the early hours of the European Session as the EURUSD drops from the daily highs and trades just below the 25- and 55-EMAs on the 1-Hour Chart. More negative pressure would be witnessed from the pair should it continue to fall below the 1.1750.
GBPUSD – Continued downward pressure this morning as the Dollar buying has also affected the GBP trading just below the 1.2980. Should the current momentum continue the next level it wills likely test would be the 1.2950, as the geopolitical tensions continue to weigh on everything.
USDCAD – After dropping from the highs of 1.3800 to the lows of 1.2410, the pair has been witnessing a bounce back as it currently trades close to the 23.6% Fibonacci Level at 1.2740. Should it be able to rise higher than that level, the next target for the pair would be at 1.3000
AUDUSD – Another attempt by the RBA to reduce the level of the AUD has borne fruit as the pair opened lower and reached a low for the day at 0.7840. The AUD is still facing downward pressure as it tried to break below the 0.7830 support level several times but failed. Should the current momentum continue it is expected to reach the 0.7800.
USDJPY – The Japanese Yen is still enjoying strong gains amid growing tensions between the U.S. and North Korea. The pair tried to break through June’s lowest level of 108.8 but failed and is currently approaching the 25-EMA on the 1-Hour Chart. More downward pressure could send the pair to fall below the 108.2.