U.S. Deficit Plan

If things weren't bad enough in the Europe, the Super Committee's proposal on deficit reduction did not find common ground over the weekend.  The super committee includes congressional leaders from both major political parties.  Their goal is to find strategies to cut 1.2 trillion dollars of U.S. debt over the next fiscal year.  These recommendations are scheduled to be presented to congress by Wednesday.  As with all things political and involving money in the United States, decisions are either delayed or poorly made.  This is how the United States got into this mess in the first place.  The debate between Republicans and Democrats on this issue is on which programs or government projects should be cancelled or supplied with less funding.  

As expected, US stock futures have tumbled.  Despite the ongoing deficit crisis in the US, the dollar continues to strengthen against Euro.  This is because Moody's investors have given a grim assessment on the French economy.  This country is considered the backbone of the Euro-zone, and continues to be relied upon by other European countries like Greece, Spain, and Italy for bailout assistance.  Warren Buffett, arguably one of the best financial investors of all time, reportedly believes that the Euro is not viable and will fail to survive.  This may be an excellent opportunity for Forex Traders to invest in the USD, which is expected to strengthen over the short to medium term.  


The EURO in Crisis

The Forex Team continues to watch the unfolding drama in Europe with much trepidation.  Will the Euro be able to survive in its current form with countries like Spain, Italy, and Greece having burgeoning debt, negative GDP growth, and ineffective austerity measures.  These concerns are shared by many economists and financial experts throughout the world.  Despite positive economic data in the United States, the possibility of a disorganized Euro collapse,or the rapid devaluation of the Euro currency continues to weigh heavily on investor sentiment.  

Countries within the the 27 member Eurozone are responsible for buying many American-based products, including military equipment, vehicles, food, and health products.  In fact, European countries account for a substantial portion of U.S. exports.  If the Euro were to collapse or significantly depreciate in value against the USD, which has become a real possibility within the last few months, the cost of American products will become relatively more expensive for the European consumer.  This will directly impact the United State's GDP, as there will be less consumption.  The tenuous rebound in the US economy will falter, and the country will likely slide back into a recession.  If this were to occur, the Euro will become much weaker, and the USD will appreciate.  However, any appreciation in the USD will be temporary, as the the United States continues to have its own debit issues and high unemployment rate.  

To worsen matter, according to the online financial new magazine Marketwatch.com, a member of the Greece governmental coalition is unwilling to sign the new austerity measures set-forth by other Euro-zone members.  The Forex Team will continue to watch these unfolding events and update you as they occur. 


The Oil Rebound

As predicted by the Forex Robot team, oil has rebounded by nearly 33% since our last post.  What makes this price increase so interesting is that it coincides with so much uncertainty about the sustainability of the Euro currency. Members of Forex Robot team believed that prices would steadily increase, but not at such a quick rate. Current oil prices are hovering around $100.  Many economists and commodity experts agree that oil prices are inflated due to speculation on two primary factors.  Iranian nuclear ambitions and recent positive news from leading economic indicators on the U.S. economy. 

Iranian Nuclear Ambitions

According to recent International Atomic Energy Agency (IAEA) reports, sufficient evidence presented to the organization indicates that the Iranian government is actively and aggressively seeking a military nuclear capability.  This is the first official report by the IAEA that acknowledges what the United States, Israel, and many neighboring Arab countries have suspected all along, that Iran has a covert military program to produce nuclear weapons.  With this official acknowledgement, many countries, including the United States believe that Israel will take preemptive military actions against Iranian nuclear and ballistic missile capabilities.  

Unlike the successful strike on Iraq's  sole nuclear power plant in 1981, the Iranians have military and nuclear facilities scattered throughout the country.  In some cases, some of these facilities were built near populated areas as a deterrence against any air assault. Additionally, the Iranians have invested heavily in an advanced ballistic missile program,  This will allow the Iranian armed forced to hit targets in all areas of the Middle East, and even in Europe.  Unlike Iraq, that did not directly respond to the successful Israeli attack on its nuclear facility, Iran is expected to respond with ferocity.  The United States will be blamed for Israel's actions, and U.S. bases in Iraq and the UAE will be attacked.  This scenario will ultimately lead to a wider conflict involving Arab countries.  The end result will be extremely high oil and gas prices.  

Positive Economic Indicators for the US

According to recent economic data, jobless claims have seen an important drop.  While the number of jobs being created is sluggish compared with the number of jobs necessary for new workers, the likelihood of a second U.S. recession is becoming smaller.  This has created optimism among investors and oil traders alike.  Oil prices quickly went from mid 80 dollars to nearly 100,dollars within a few weeks.  However, the Forex Robot team believes that the problems in Europe will begin to impact trader sentiment and oil prices will once again go down.  


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.  


Greece Bail Out

Well folks…  It's been an interesting trading month filled with uncertainty, speculation, and adventure.  In order to avoid a Lehman type collapse, the big financial players in the Euro-Zone made the decision at the end of last month to supply Greece with a large loan to avoid collapse.  Had Greece been allowed to default, the Euro would have quickly depreciated in value, creating further instability within the Euro-Zone.  After a serious slump in major markets and indices, the markets roared back to life, finishing the week with great fanfare.  

Despite reports of continued economic expansion and increased manufacturing activity, unemployment in the US continues to be stubbornly high.  Real estate prices have double dipped, albeit there be reports of a sharp increase in home sales.  The EUR/USD is trading at $1.45 after being close to $1.41 before the Greece bailout was confirmed.  Robot Forex still believes that there is much uncertainty ahead, especially with conflicting reports of economic expansion and a high unemployment rate.