With North Korea pushing the world closer to another war, and causing global stock indexes to plunge and risk selling to take place, the US swiftly responded to alleviate the tension. However, this time around it wasn't with tanks or F-16 fighter jets, but with the strength of its stock markets. As US indexes shook off huge early losses, and rallied to near changed levels, it supercharged risk appetite for Forex traders. As such, the AUD, NZD, and CAD which had traded to 2010 lows against the dollar suddenly saw tremendous buying taking place, as traders took advantage that the month long selloff had created.
Looking ahead, Forex traders will be watching the trading of European stock indexes for confirmation the yesterday's late rally can continue. Specifically, the US economy will be in focus as key Housing and Manufacturing numbers will be released.
Rallied nearly 250 pips from its lows yesterday. The key for the EURUSD today is whether it will hold above 1.2250 support. If this key technical level breaks, it could easily cause sellers to quickly return to the pair and wipe out yesterday's entire positive move.
Gold traded above 1200 and continues to attract buyers as it has showed that it can rally it both rising risk appetite and risk aversion markets. As such, traders will be watching the $1200 to see if it holds and rising demand in the metal is taking place. Below 1200, Gold also continues to have very solid support at 1185.