Korean War veterans leading different lives reunite. Image source: U.S. Air Force photo / Staff Sgt. Bennie J. Davis III
Tensions between South and North Korea have erupted once again today after North Korea's military destroyed a joint office building, which served essentially as an embassy.
The calculated action was supposedly prompted as political retaliation by Kim Jong Un, whose regime was allegedly undermined by South Korean activists and North Korean defectors.
The latter were reportedly sending leaflets during the week prior to the incident, with the intent to sabotage Kim's oppressive regime in the Democratic Republic.
Many political experts were quick to respond to the issue by ensuring that the destruction of the building is a strategic move meant to rebuke Seoul without risking more serious intimidation that could lead to war.
Even still, the episode is likely to erode the fragile inroad that has been made over the last several months in bringing the two countries closer together through democratic means.
Pyongyang recently severed its diplomatic ties with its southern neighbour, which represents another blow to the feeble political landscape in the region. These developments have caused heightened uncertainty that is currently affecting Asian markets.
KOSPI futures – Korea's Composite Stock Price Index – tumbled by nearly 4 per cent during yesterday's trading session, however, the index was able to correct those losses today.
South Korean stocks were even able to close higher amidst the rising political tensions near the DMZ, which is partly due to the general opinion of experts that North Korea is not trying to incite a military conflict with its actions.
As can be seen from the 4H chart below, the KOSPI fell almost to the 23.6 per cent Fibonacci retracement level at 2033.24 before the rebound. The level itself is serving as a prominent turning point, which is why the index is unlikely to fall below it for the time being.
Provided that the political turmoil gets scaled down in the following days, the index is likely to resume trading towards the major resistance level at 2216.30
Nevertheless, the three Moving Averages represent compelling evidence to the contrary. The descending order of the 5-day MA (in blue) trading below the 8-day MA (in yellow), which is trading below the 13-day MA (in red) underlines the increased bearish momentum in the short term.
If the price action consolidates below these three MAs but fails to break out above them, this could provide market bears with more significant indications for a potential change in the underlying sentiment.
KOSPI 4H Price Chart. Image source: Trendsharks ©, created with TradingView.com
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