Buyers are not quite in control of the pair just yet
The high today was at 109.74 with the pair now trading at 109.54 – under the 50.0 retracement level @ 109.65 once again. For buyers, a break of said level would be a good platform to build on towards a move back to the upside.
But the key test lies in breaking above the 110.00 handle once again, and more importantly the 200-day MA (blue line) @ 110.21. Breaking above the latter sees the bullish bias regained, and will help to move price back towards a test of the May highs.
At the moment, bids at 109.00 is helping to provide support for the pair with further support seen at the 14 June low @ 108.83.
This week movement in the pair has been driven heavily by risk sentiment. Overnight news of Trump cancelling the US-North Korea summit sent the pair to lows to test the 109.00 handle but ultimately failed as price rebounded.
While the market may be a bit nervous about tensions between US and North Korea, recent developments over the last week has helped to cushion the blow when Trump cancelled it yesterday. It felt like it was only a matter of time before one of the two parties did so, and Trump decided to go ahead with it first.
There’s still quite a lot at stake for North Korea too as any setback in relations with the US will also impact the positive developments in their talks with South Korea and China. With that said, there’s little reason for traders and investors to panic all too much just yet.
This can only play out in one of two ways. Either peace talks will still go ahead albeit in delayed fashion – which means the market should not be that worried – or North Korea is going to return to missile tests again, in which an aggressive repricing of risk sentiment may be seen.
For now, the latter seems the more unlikely scenario – as strange as it sounds – so the market pricing in a bit of uncertainty on that is just about right. But it’s not time to hit the panic button just yet.