Originally published by AxiTrader
It's very fluid in forex markets this morning after North Korea shot a missile across Japan to land off the coast near Hokkaido.
That's seen the yen catch a bid with USD/JPY falling from 109.16 earlier to sit at 108.87 and it's seen the Aussie dollar knocked back from the mid 0.7960's to sit at 0.7935 as I write.
Whereas an hour ago I would have been writing about the weakness of the US dollar, the rally in the euro and gold, and their impact on assisting the AUD/USD to break up through the 0.7962 level I highlighted yesterday now I'm focussed on the risk off tone in forex markets as a result of the North Korean actions.
What's important about the DPRK actions is that it ratchets up the pressure on President Trump, and Japan, to respond and may put them squarely in a face off with China should they respond militarily. It's a high stakes game Kim Jong-un is playing as the ABC in Australia says this is the first time the DPRK has shot a missile across Japan since the late 1990's.
I don't want to overegg it but recall back on August 9 President Trump made his "fire and fury" comments about North Korea if it threatens the US or its allies.
So we await a response and the AUD/USD is lower as market nervousness and uncertainty ratchets up a few notches. The Aussie never does well in uncertainty like this, when markets go into a funk, and risk aversion rises materially.
It may be a storm in a tea cup. But until forex traders hear from Secretary Tillerson or Mattis, or the President himself the Aussie may remain pressure and the yen bid.
Looking at the charts is rife for wrongness today - but here we go anyway.
0.7890 the key support.
Have a great day's trading.