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In the Zone
- UN meeting around North Korea may potentially affect the markets today. The tone out of the White House suggests that conflict is getting closer to inevitable and any time I see mobilization of weapons, I start to wonder if the time for words have passed.
It can be frustrating checking the markets when the daily ranges are 10-20 pips, so on days like 4 July – I find it easier to turn my computer off and go out for the day. There is a feeling similar to that of the day after Christmas break, since we effectively have not had a decent New York session since Thursday of last week and I am sure that the market will be happy to have both the US and Canada back. I mentioned earlier in the week that on weeks like this we will need to pay more attention to the fundamental side as the technical side plays “catch up.”
Markets are quite this morning in the wake of developments in the East, we had North Korea test firing yet another missile on Tuesday and it has been confirmed that this missile has the potential to reach Alaska. The US and South Korea responded last night with test firing of their own missiles into the East Sea which I am sure will raise tensions with North Korea, meetings between Russia and China culminated in them calling for both North Korea and the US to step aside.
This makes the planned meeting between Trump and Putin later this week even more news worthy, the relationship between China and the US is souring and I doubt Trump will give them much time. If I have to be honest, President Trump has clearly shown that he has ideas of his own and I don’t believe he will pay much attention to other leaders.
I am keeping an eye on the Dollar Index, it is starting to show some signs of a bottom and with a slew of economic data out of the US this week and possible clarity around the Healthcare Bill this week we may see a catalyst for the dollar to start recovering somewhat. I have mentioned it for the last week but I will be keeping an eye out on the USDJPY, the pair is at an extreme overbought area and a recovery here could unlock the move as the JPY will recover against all the pairs and this may be where the momentum comes from.
The USDCAD also represents a possible opportunity for me, BOC Governor Poloz was again overly hawkish yesterday and the CAD strengthened significantly against all the major pairs. The pair smashed through major support stretching back over 18 months at 1.2968 before settling at 1.2920. The market seems to be pricing an interest rate hike at the next meeting, if he does hike we could see the pair bounce on a, “buy the rumour sell the fact,” and if he doesn’t hike then we will see a total unwind of the move this last month.
I have covered all the pairs in the morning video, let’s hope the New York session does not disappoint this afternoon.
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