Wow! What a night on US markets. Equities crashed and safe haven assets have taken off as US President Donald Trump continued to put North Korea under pressure.

This is all started a couple of days ago when President Trump said he was going to unleash “Fire and Fury” on North Korea. Last night Trump came out for a second time and promised retaliation ‘like they never thought possible’, should North Korea launch a missile test near Guam.

Markets were slow to react, but by Thursday traders got the message. The S&P 500 fell in a big way and was down 1.65%, while gold and bonds – what we consider ‘safe’ assets – started to climb. The good news is that as traders these are the types of moves that we want to be seeing. Volatility is our friend. The question really is, what’s the best way to take advantage of it?

Cashing in on the Fear

When fear is at its highest point the best plan of action is to trade with the momentum. So for today’s Asian session, that simply means going with the market sentiment. Which for the equities is most certainly to the downside.

Japanese equity markets are on holiday, but there will still be activity in various futures markets and FX. There will be opportunity in other Asian equity markets as traders start their day.

USD/JPY

The Yen is an interesting trade, especially when markets get shaken like they have been overnight. There’s a degree of safety about the USD/JPY given its issue with long term deflation. While not a classical risk-off trade it can offer some good protection for traders. Remember it is technically a holiday for Japanese traders, however there is still activity in FX markets.

Trading Plan

Our strategy again is to target pullbacks. There’s no need to get cute, just go with the momentum and look to enter and test support levels. 109.000 is our key focus today and we are looking to hit that level.

Key Levels