Global macro overview for 14/08/2017

Global macro overview for 14/08/2017:

The increase in geopolitical tension has become a convenient pretext for some investors to fix some profits. On Thursday, this pretext also worked, as President Trump sharpened rhetoric against North Korea. He stated that his previous statement was too weak and did not want to ensure that the United States did not make a preemptive strike. The US strongman warned North Korea in no uncertain terms this week that its continued threats if carried out, would be met with overwhelming force. North Korea, undeterred, announced it was planning to target the waters surrounding the US territory of Guam with four missiles and that a plan would be ready within a matter of days. Trump responded by noting US military plans are now "locked and loaded" should North Korea act unwisely. In the result, the US and global indices retreated further from the recent all time highs.

The ramp up in rhetoric between the Trump administration and North Korea has caused a flight-to-safety (as one would expect). This has triggered a safe-haven rally of gold futures, US 30-year Treasuries, the Japanese yen and the Swiss franc. During the weekend the ongoing tensions decreased a little, but are still far away from termination, so this week the US-Nort Korea conflict development will still be number one geopolitical news that will influence the financial markets. It is worth to mention that tensions have risen after the United Nations imposed sanctions against North Korea. The sanctions aim to cut North Korean overall exports by 30% and ban international exports of coal, iron ore and seafood.

Let's now take a look at EUR/CHF technical picture on the H4 timeframe. This currency cross will be highly influenced by the increase of geopolitical risks. Bulls have managed to retrace around 50% of the recent drop and now the price is trading just below the technical resistance at the level of 1.1411. In case of a further escalation of the conflict, the flight-to-safety procedure will continue, which is why lower prices are expected. The next important technical support is seen at the level of 1.1198.