The US vs. North Korea. Can Americans Sleep Peacefully?

Risks have increased amid Trump’s statements about North Korea. Secretary of State Tillerson tried to calm Americans, saying that they “can sleep peacefully.” Meanwhile, Trump’s rather harsh words garnered criticism from both Republicans (McCain, for example, said that he is not convinced that Trump is prepared to act) and from Democrats (Ben Cardin, a Democratic senator, said that Trump’s statements are counterproductive). Along with everything else, yesterday the FBI searched Paul Manafort’s home as part of its investigation into Russian meddling in the election. Naturally, all this affected the market. Gold soared, immediately breaking through $1280 per troy ounce, but the situation later stabilized a little. The USD/JPY pair formed a gap down, testing the lower boundary of the ascending price channel that formed the foundations in April and June. Technically, a continuation of the bullish trend requires a breakthrough at 110.5, where there is a 23.6% Fibo correction.

Today in the United States the PPI and the number of initial jobless claims come out and remarks by FOMC member Dudley are expected. His attitude might help the dollar strengthen briefly, but, given that he voted against raising the interest rate at the last meeting, we can anticipate that his attitude might be dovish.

BREXIT secretary David Davis’s letter on agreements reached in Brussels on the status of EU residents living in the UK was also released yesterday. The letter was optimistic, but not everyone shares this optimism. For example, Davis’s ex-colleague James Chapman called Brexit a disaster. Indeed, there is still no significant progress to be seen in the UK’s divorce from the EU. All this could make certain traders nervous. As we noted a couple of days ago, this presents a pretty good opportunity for the GBP/USD pair to scalp down. The ascending price channel with support at 1.2820 continues, but short stops will protect the bears from unsuccessful positions.

Nikolay Dudchenko, exclusively for Olymp Trade

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