Pre-Market: Korean Easing Boosts Risk Assets

In a surprising, but very positive turn of events, South and North Korean officials agreed on an April summit today, while Kim Jong Un’ s regime expressed will to open talks with the US on denuclearization. The country’s main demand is a guarantee that the regime will be safe, while North Korea would also cease the testing of ballistic missiles and start negotiations with its neighbor.

S&P 500 Futures, 4-Hour Chart Analysis

The news triggered another round of buying after yesterday’s rally in equities and other risk assets, with the Japanese Yen also selling off in a sign of a more bullish investor sentiment. The rally is also helped by the strong opposition against Trump’s tariff plans, which eased fears of an outright trade war between the US and its largest partners. While the advance is encouraging for bulls, and the bounce could continue, the technical setup is still suspicious, and the divergences that we have been monitoring since the crash in early February still persist.

DAX Index, 4-Hour Chart Analysis

Today’s strength in the Euro weighs on local equities, while Asian markets are also still lagging the US indices, with the rally still looking narrow. The Nasdaq remains much stronger than the other major global indices, with the S&P 500 only bouncing back to the key 2735 level despite the two-day short squeeze and today’s pre-market rally.

That said, the chance of a bull trap in the DAX is still on, as the German index is holding up above the key 12,000 that we noted yesterday, and aggressive bulls could enter positions here if they think that the technical headwinds will be overpowered by the still intact long-term bullish trend soon.

Dollar Lower as Aussie Bounces after Rate Decision

AUD/USD, 4-Hour Chart Analysis

US Treasury yields are stable, holding on near their recent highs, but as sentiment improved the USD sold off against most of its peers with only gaining some ground against the safe-haven Yen. The Australian Dollar, which has been very weak since the correction began, has been boosted by today’s RBA statement, despite the unchanged interest rate, and the Korean easing, while the rally in crude oil and gold also helped the commodity-currency.

Despite the move, the Aussie, and the also rallying Canadian Dollar are still well below the pre-crash highs, and as they have led the market during the correction, we still remain defensive towards risk assets here.

What would change our short-term position is a sustained rally above 25,000 in the Dow and 2735 in the S&P, with further healing in Europe, Asia, and risk-on currencies, and today’s session could provide valuable answers for traders.

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Trader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.