Results across the world dictated sentiment, where uncertainty in Germany and New Zealand caused some currency woes.

EUR suffered following the weekend results despite Chancellor Merkel being set for a fourth term. Merkel’s CDU/CSU performed weaker than expected and will now need to undertake coalition discussions, likely set to attempt to form a ‘Jamaica’ Coalition with the FDP and Green Parties, with FDP being an initial hurdle. EUR/USD rejected 1.20 on Friday, and struggled as Asian trade began, trading through 1.19, now consolidating just above these levels. EUR/GBP saw similar price action, finding support ahead of September’s lows. A break through the 0.8774 area could see trade once again in the start of 2017’s trading range.

NZD was also heavy following their election results, and in line with Germany, despite a victory for the National Party, a majority was also not secured. This places the next government at the hands of New Zealand First Party’s leader and effective ‘kingmaker’ Winston Peters, who is all too familiar with this obligation having supported both the National Party and main opposition Labour in past governments. NZD/USD find some support following initial selling pressure, support at September 18th’s low held, with some buying evident around these levels. AUD/NZD held just through 1.0800, yet continuing to show a downward trend following the stacked offers seen around 1.1150 through September.

Commodity currencies at slightly better levels amid rise in oil prices, in which Brent formed fresh YTD highs and is on course for the highest close since 2015 amid reports that President Erdogan threatened to halt oil exports from Iraqi Kurdistan. Of note, this would roughly impact 550k bpd of Kurdish oil.


Foreign minister says Trump’s comments over the weekend were clearly a declaration of war The international community should clearly remember it was the US that declared war on North Korea North Korea says it has the right to shoot down US strategic bombers even if they are not in North Korean airspace Since the US declared war, we have every right to take countermeasures We’ve heard this kind of talk before but the words ‘North Korea’ and ‘war’ in a headline are the kind of thing that really sets off the algos.

“The whole world should clearly remember it was the U.S. who first declared war on our country,” Foreign Minister Ri Yong Ho told reporters in New York. “Since the United States declared war on our country, we will have every right to make countermeasures, including the right to shoot down United States strategic bombers even when they are not inside the airspace border of our country.”


Dollar Index H4

Price is currently at the top of the range with an overbought stoch (note the stoch has not indicated a change of direction yet). Bottom of the range highlighted in green.

US10Y H4

Price came off last week's profit taking zone with the target holding like we expected it would. Price has made a higher high. Should the market react to the current risk sentiment with NK and USA, that could see price coming down to support and then moving up to the weekly target of WM4/ WR2. Markets are currently risk off. Safe havens strengthen in risk off markets.

S&P 500 H4

We noted last week that price had not made a higher high, though that price had not made a lower low either. Price came off WM3 earlier today and bounced straight off the weekly target. Pivot theory tells us that price will be back at WPP by the end of the week though I am aware of the risk sentiment in the market at the moment and it is also possible that price could move lower down to the support highlighted in green. Note the pullback to the 38.2% and target of 161.8%. The Vix is currently at 10.62, still very low indicating that a lot of traders are not hedged against potential volatility that could take place this week if markets continue to move to safety in response to NK and USA news.

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