North Korea is potentially one of
the biggest geopolitical players of our lifetime. The country of more than 25
million people and a GDP surpassing $25 billion has become a thorn in the
West’s side because of its insistence on developing nuclear weapons. Today, N.
Korea is lagging behind its southern neighbor, South Korea which has a
population of more than 51 million people and a GDP of more than $1.5 trillion.
South Korea is home to some of the biggest global brands like Samsung, Hyundai,
The main reason why North Korea
has lagged behind the south is that its system of government is communism. The
country is headed by a family, that has become very powerful. To protect its leadership,
the country has insisted on building nuclear capabilities. These nuclear
weapons are manufactured to prevent any foreign interference or an attempt to
overthrow the regime.
Today and tomorrow, the country’s
leader, Kim Jong Un, will meet with the US president, Donald Trump for a summit
that will aim to address the key issues. The United States will want the
country to eradicate its nuclear weapons while North Korea will want the US to
remove the sanctions that have been put in place. These sanctions make it
impossible for the country to trade.
However, experts believe that
achieving the denuclearizing goal will be close to impossible because North
Korea uses the weapons as an insurance policy. This thinking is valid because
in the past, the United States has not been good at keeping its promises. For
example, the US was a NATO member who helped dethrone and kill Libya’s Gadaffi
after he agreed to destroy the weapons of mass destruction.
As these negotiations continue, traders
may be paying close attention to the Japanese yen, which is often viewed as a
safe haven. This happens despite the fact that Japan is located a few miles
from North Korea. It is also an American ally, which might means that it would
fall victim in case of a war in the region. In fact, North Korea has flown
missiles above the country.
As the talks begin today, the
USD/JPY pair has declined to a low of 110.53. This is close to the weekly low
of 110.44. On the chart below, this price is below the medium-term moving
averages. The RSI has also moved to below the 30 level. While the pair could
continue moving lower today, there is a possibility that it will be a bit
volatile. In fact, the Relative Volatility Index has been rising as shown in
the chart below.