- US equity markets tumbled following more comments from Trump
- Safe haven flow prevails once again
- SP500 (US500 on xStation5) breaks a crucial trend line
“Fire and fury” seems to take its toll on Wall Street with a small delay as major indices plunged yesterday marking the second worst session this year. There was a classic case of risk aversion during Thursday on mounting worries about a clash between the US and North Korea and fresh comments from Donald Trump. As a result, the USDJPY slumped yesterday quite substantially, a move that was additionally sped up by a bleak report on PPI overshadowing the outlook of yet another rate hike this year.
There was another remark from US President Donal Trump which could have depressed stock markets all around the world as he said that the statement maybe “wasn’t tough enough.” He also declined to rule out a preemptive strike on Pyongyang, saying, “we’ll see what happens.” Moreover, Defense Secretary added that the military has options available and that North Korea “should cease any consideration of actions that would lead to the end of its regime and the destruction of its people.”
When we take a look at the chart above, one could notice that bears were able to break a relevant support trend line which served as a springboard for bulls to gain momentum. That level was underpinned by a 23.6% retracement, hence a breakout could entail more declines even toward 2400 points where a more noticeable support area is placed.
Rising tensions between the US and North Korea led to an outstanding surge in the VIX (aka ’fear gauge’). The index jumped about 44% to 16.04. Even as it’s still below its historical average of around 20, it underlines an escalating sense of trepidation around global events. A risk-off mode is seen in the morning as well as the CHF and JPY are in demand once again.
By and large, it does not look like a substantial chance to begin a war between two countries but for markets it has turned out to be sufficient to mark a huge reversal. There is a likelihood of a comeback of bulls if the North Korea’s thread settles down.