Archive for September, 2016

The oil slump…

If your like our Forex Robot team, you've been watching equity prices follow general market trends.  It's been observed that whenever the USD strengthens against other currencies, commodities that are traded in US dollars are inversely effected.  With so much fear and instability in Europe, the dollar has risen sharply over the last few weeks.  Additionally, economic indicators spanning throughout the globe point to a significant slowdown and possible double dip recession for large developed  Western countries.  

For individuals who aren't afraid of volatility, members of Forex Robot believe that this is an excellent opportunity to start buying commodities, including silver and oil.  We suggest avoiding gold for the interim, which we believe will see an correction.  However, oil will continue to remain in high demand regardless as to the economic climate.  When you consider developing economies and the number of new cars being purchased, it is not unreasonable to assume that oil prices will reach $150-$200 within the next 3-5 year.  When you factor in the political situation in the Middle East, including continued violence in Syria, Iran's continued pursuit of nuclear weaponry, the UN bid for Palestinian statehood, and Israeli-Turkey tension, we believe oil is a sure bet.  


Time to buy the Euro?

It's been a long and challenging week for investors after fear gripped the markets, and global indices hit their lowest levels in a year.  The EUR/USD is now trading around 1.34, which demonstrates the low level of confidence foreign exchange traders have for the Euro-Zone.  Despite promises from large economies like France and Germany to bailout Greece, European economies are experiencing limited output and growth.  Other data shows that Asian markets are also experiencing an economic slowdown.

Economists are warning that the situation now is worse than the collapse of Lehman Brothers in the United States .  Global banks in Greece, Italy, France, and the United States have all been downgraded by Standard & Poors.  When there is concern in an economy about the ability for banks to repay creditors, investors quickly find other institutions to put their money.  This creates limited liquidity for the average citizen looking to start a business, buy property, or purchase a car.  The implications of a default would be disastrous for the whole world, as there aren't many more things central banks can do to stimulate their stagnating economies. 


Here we go again?

 

It was a brutal day for investors and Forex traders with large holdings in the Euro.  A combination of stark warnings from the United States Federal Reserve about the risks of a protracted recessionary period, and data that reveals a contraction of business output in the Euro-Zone, has led to the most significant sell off on world markets this year has seen so far.  Despite data that indicates less jobless benefits were claimed in the United States and an unexpected increase in home sales, investors simply weren't taking any chances.  

George Soros, a self made billionaire and investor, recently expressed his belief in a television interview that the United States is already in a double dip recession and to expect the dollar to strengthen against the Euro.  Soros also indicated that the continued inaction by large European economies to bailout other Euro-Zone countries in near default, could have worldwide implications that were beyond his imagination.  When the interviewer requested an explanation for this strong position, Soros began to explain that the Euro is currently the favored currency of emerging economies.  If the Euro were to quickly depreciate in value, the net worth of these countries' economies would quickly go down.  

The Forex Robot team believes that the economic situation for the global economy is in a very dangerous place.  Many Western countries are stuck between inflationary stimulus strategies and austerity measures.  These policies almost seem contradictory and have had little consequence so far.  


Palestinian Statehood

The Forex Robot team is waiting anxiously to see the results of  an ambitious bid by President of the Palestinian Authority, Mahmoud Abbas for full state recognition by the United Nations.  The primary area being requested for statehood was formerly under the control of the Jordanians, and is commonly referred to as the West Bank.  Another small coastal enclave south of Israel was under the control of the Egyptians, and is also a part of this ambitious bid for UN state recognition.  

For those unfamiliar with this region, after the Six Day War in 1967, Israel succeeded in driving out the Egyptians and Jordanians from these two areas.  During that era, Arab regimes were hostile towards the recently established Jewish state, and negotiations with Israel was considered highly taboo.  Certain segments of Israeli society felt that since the Arab countries were unwilling to compromise, and the local populations within the West Bank of Jordan and Gaza were relatively small, building towns and outposts within the territories was warranted.  However, the Arab populations quickly grew in these areas, and the Israelis living outside the 1967 armistice line were considered foreigners and unwelcome.  A military presence was necessary to effectively defend Israelis living inside these disputed territories, and to prevent Palestinian infiltrators from incessant terrorist attacks that mainly targeted civilians.  These security measures intensified after the first and second Palestinian uprising.  

At this juncture, Israeli towns and villages in the former West Bank of Jordan comprise approximately 3% of the land.  However, restricted roads and security checks make life for average Palestinians both difficult and humiliating.  Peace negotiations were started between the Israeli and Palestinian leaderships several times, but failed.  Major points of contention include the division of Jerusalem as a ]capitol city for a future Palestinian state, and the allowance of 4 million ancestors of Palestinian refugees to move to Israel.  

Due to stalled peace talks, and continued Israeli housing construction in the former West Bank of Jordan, Mahmoud Abbas chose to circumvent Netanyahu's government, and seek legal status from the United Nations directly.  If Palestine is recognized as a country, the State of Israel would be in clear violation of international law by occupying a foreign country.  The Forex Robot team believes that since the realities on the ground for both Israelis and Palestinians will remain the same, it is in the best interest of both parties that direct negotiations take place to resolve this longstanding conflict. 

Due to recent strife with Turkey, instability in Egypt, and a high level of tension in the disputed territories, some members of the Forex Robot team believe that the shekel (NIS) will continue to slide against other major currencies.  Whether you are a fan of Israel or not, it is a country recognized by the United Nations with one of the strongest economies in the middle east.  It would be unwise to avoid potential money making investments as a result of personal bias or misinformation.  

May there be peace and security for everyone in this world without exception!  


Italy Downgrade

Monday's sell off of global stock markets and the sharp weakening of the Euro were predicted by the Forex Robot team.  To worsen matters, Standards & Poors has downgraded Italy. The reason for this downgrade is due to Italy's weakening economy and its perceived insufficient response to solve it's current debt insolvency.  Fear is beginning to grip traders throughout the world, as it is recognized that a weakened Euro and the possibility of a country's default within the EuroZone will have serious consequences for both global economic health and stability.  

Nouriel Roubini, a famous economist, known for his accurate prediction of the 2008 economic and housing market collapse has suggested that Greece should quickly find a way to exit from the Eurozone.  He suggests that Greece's economy is already in default, and by allowing large European countries, such as France and Germany to provide continued financial assistance in the form of bailouts, the whole EuroZone is being adversely effected.  Additionally, he believes that there are little chances of improvement for Greece, especially with a population unwilling to accept austerity measures set in place by the highly unpopular government. 

Another important market being impacted by extreme volatility is the equities market.  Brent and crude oil prices have seen wild swings over the last few weeks.  For those traders with steel stomachs, we suggest buying oil below $85 and selling when the prices reach close to $90.   


Short the Euro?

It's been a tumultuous past few weeks for major indices throughout the world.  Our Forex Robot team understands that the United States economy continues to experience serious setbacks that are preventing any real economic growth.  Factors preventing growth include stagflation, high food and energy prices, limited job growth, and few governmental measures left available to have any real stimulating effect.  Despite a recent 300 billion dollar proposal by President Obama to help stimulate the economy in the form of aggressive tax cuts and job creation, many economists believe that even if it is passed by both both parties in the House and Senate, it is simply too little too late to prevent the U.S. from sliding back into a recession.  Recent economic reports indicate that there is currently no job growth and the number of Americans below the poverty line is nearly 1 in 6.  These sobering statistics were last seen in 1993.  

Over the course of the last few weeks, we've seen the Euro tumble in price against major currencies, including the USD.  Serious doubt persists among currency traders with respect to the sustainability of the Euro.  Despite efforts to bailout Greece, the country is seemingly incapable of making sound austerity measures to restructure their economy.  Some experts are beginning to suggest that Greece will inevitably default, causing a chain reaction that will ripple throughout the Euro-Zone.  Even though important European players, including France and Germany have pledged that continued assistance to avoid this potential calamity, doubt remains.

The Forex Robot team expects extreme volatility for the EUR over the course of the next few weeks.  When it becomes clearer as to how the global economic slow down has impacted France and Germany, there will be serious movement.  Additionally, our Forex Robot team also believes that the USD will appreciate in value against other currencies after it is realized that the United States economy is slipping into another recession.  


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