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FUNDAMENTAL ANALYSIS


FX


Chart 1: Korean Tensions - Yen surges, Japanese futures slide aſter missile launch


So, the question is what does really drive the risk-off trade? Anything which can lead to an event that can prompt traders to run for the hill or start parking their capital in more safe assets. Usually, it is around two major events; firstly, the change in the monetary policy of a major central bank. Lastly, the geopolitical tension. Te latter has occupied the main arena especially since Donald Trump has become the president of the United States of America. President Trump has taken a hard-line stance towards


North Korea and used statements such as “Fire and Fury” which have been matched by more and more missile tests by North Korea.


North Korea has been very active since this year in testing its missiles but the two intercontinental ballistic missiles which it tested have far more destructive power than those dropped by the US on Japan. On the back of this incident, the immediate reaction for forex traders was liquidating their position and jumping into the


safe haven currency. Te Japanese Yen as a result of this strengthened immediately overnight (on the night of 29th August).


These missile tests by North Korea were not going to go unanswered. President Trump gave his tough and unedited statement on the country’s reaction before turning to the United Nations. He requested the U.N. to impose the toughest


sanctions on the country.


Te aim was to control the country’s imports and exports and ultimately


Chart 2. Gold surges as North Korea fires missile over Japan FX TRADER MAGAZINE October - December 2017 35


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