Forex News Update

More trouble for the EuroZone

Just when Forex Robot members thought that the aggressive measures taken by major central banks to allow greater liquidity to lending institutions would improve the Eurozone's overall plight, a lack of cohesion among European members has rattled stock markets and currency valuations.  As this article is being written, markets in Asia have tumbled in light of Europe's continued lack of cooperation at the European Union summit.  Unlike in the United States, where there is more flexibility in terms infusing more liquidity into the markets, the European Central bank has many restrictions that prevent these types of policies.  The only way the ECB will be permitted to make these important changes its laws are ratified.  However, ratification requires a consensus of the 27 European countries.  With continued squabbling, the Euro remains in crisis.

Crude over $100

The increase in crude prices has risen to over $100 dollars a barrel.  This price increase is on the backdrop of news reports that an advanced US unmanned aerial vehicle was either shot down or crashed in Iranian territory.  What makes this event particularly concerning to the Forex Robot team is that the specifications of this sophisticated UAV remains classified due to the sensitive technologies of this unique aircraft.  The RQ-170 Sentinel is the only known UAV designed with sophisticated stealth to allow for spying missions deep inside enemy territory.  

The CIA is often in direct control of these aircraft, and there are mixed reports as to whether the Iranians were able to retrieve most of the aircraft intact, or whether it incurred significant damage upon impact.  In any case, there is a good chance that US made technology in now in the hands of a serious adversary, which will allow the nexus of pariah states, including North Korea and Syria to increase their capabilities or learn ours.  Perhaps these aircraft should include an automated self destruct module for situations like the one we find ourselves in today. 

Cain out… Ron Paul in?

The next U.S. presidential elections in 2012 will be both interesting and unique.  Ron Paul, a self described libertarian has become more popular among Republican voters after Cain's recent announcement.  He informed members of the press that he intends to leave the presidential race after allegations surfaced of an extra-marital affair.  In order to protect himself and family members, this announcement came over the weekend.  It is hard for the Forex Robot team to contemplate the next leader of the United States being a full fledged and committed Libertarian.  

Under Ron Paul, many federal-based government issued programs will cease to exist.  An example of some these programs include both Medicare and Medicaid.  According to Paul, these federal based programs are not in the constitution and therefore unlawful.  With increasing debt of the US government, war, unnecessary military spending, and bases scattered throughout the world, Americans are fed up with having little say with their destiny.  They simply want the United States government to start making appropriate and sound decisions.  Obama promised change but delivered little.  Ron Paul would certainly change US foreign policy as well as internal policies.  More power to individual union states and less power to the federal government.  The Forex Robot team wishes Ron Paul the best of luck in his pursuit of the presidency. 

Iranian Intransigence

Forex Robot analysts were frustrated but not surprised by the unprecedented and irresponsible attack on the British Embassy in Tehran, Iran.  This event brought chilling memories of the 1979 Islamic revolution that resulted in US embassy personnel being held hostage for more than a year.  At the time, president Carter refrained from military intervention until exhausting all diplomatic options.  However, the military operation failed miserably after a C-130 fuel tanker crashed with a helicopter enroute to rescue to the US embassy diplomats.  Eight American servicemen lost their lives in this failed operation.

To the relief of the British government, any hostages taken by the aggressive and emotionally charged Iranian crowd did not result in a similar hostage situation.  In fact, all the embassy workers were quickly released and flown back to London.  As a consequence of this event, the UK embassy in Iran has been effectively closed down until further notice and the British government has expelled all Iranian diplomats in response.  Of course, the price of oil was effected adverses, with prices going higher.  It is now being reported in various media outlets that the French government has also ordered its many of it embassy staff to return to Paris.  

Positive Unemployment Report

The Forex Robot team is happy to announce continued positive economic activity being reported in the United States.  According to the data gathered, the unemployment rate has dropped to 8.6%.  This has alleviated some fear among economists and financial analysts about the possibility of a double dip recession in the United States.  Additionally, recent measures taken by the Federal Reserve, European Central Bank and China will enable financial institutions to lend money more easily to qualified individuals and companies looking to expand or purchase assets.  We're curious to see if the Federal Reserve will consider taking steps to hinder inflationary pressures as a result of this unexpected positive news in unemployment figures.  If so, interest rates will rise and the USD will appreciate against the Euro. 

Despite the positive economic indicators, Forex Robot analysts believe that there continues to be much risk for the global economy.  The Europeans must still figure out how to deal with the messy debt issues for countries like Greece, Italy and Ireland.  Even with increased liquidity measures designed to assist lending institutions, a small negative event could have serious global repercussions.  

The Forex Robot team is also keeping a close eye on Egyptian election results.  According to preliminary reports, the Muslim Brotherhood is expected to have a majority in parliamentary seats.  The world's initial response to the most nonviolent elections was positive.  The Egyptian stock market rose and the Egyptian Pound rose against other currencies.  However, political scientists and world leaders are waiting anxiously to see how the organized Muslim Brotherhood movement will uphold Egypt's current peace treaty with Israel and whether the country will adopt more hard-line Islamist values.  10% of the country is Coptic Christian, who are already beginning to feel more persecuted by growing Islamist trends.  Additionally, the small country of Israel is watching events unfold in the region as well.  It has enjoyed relative stability with Egypt under Mubarak and hopes to preserve this atmosphere of peace. 

Markets Roar Back

Our last entry by our Forex Robot team discussed the gloomy outlook for both Europe and the rest of the international economic community if a viable solution was not quickly found .  At the time, it had not been announced by the US Federal Reserve Bank, the European Central Bank and China that aggressive measures were agreed upon to supply much needed liquidity to financial institutions.  Investors were exhilarated by this announcement yesterday and stock markets throughout the world jumped by nearly 3-5%.  The EUR also recovered somewhat against the USD to nearly $1.34.

The question in the minds of our Forex Robot team is whether this is a short-term solution or something that will permanently have a positive impact on the markets and currency valuations.  After yesterday's central bank induced rallies, it appears that markets are staying within range of their opening positions.  The Europeans must continue to contend with a very complicated situation involving both Greece and Italy, who continue to struggle with the austerity measures they promised to implement.  These policies are the reasons why so many Italian and Greek citizens are protesting against their respective governments.  Unlike in the United States, that has relatively limited social services program, countries like Greece and Italy have many.  These programs are quickly accepted by societies but very difficult to let go.  

The possibility of a disorganized break-up of the Euro still exists and should be considered when investing in Forex.  You should be vigilant and listen to news often.  The Forex Robot will do our best in supplying you with information about current events related to economic activity and currency valuations, especially the Euro. 

The Storm is still Brewing

Despite seeing significant gains in both Asian, European, and US markets two days ago, stock futures are again falling across the board.  The reasons for this continued unease among investors are a combination of several factors.  After a meeting of European finance ministers in Brussels, there lacked a unified consensus in ways to effectively contend with the burgeoning sovereign debt issue for countries like Greece, Italy , and Ireland.  The longer the European financial crisis continues without an effective way to solve this very serious issue, the more difficult it will be to contain.  Forex Robot fully appreciates the fact that if there is no reliable solution to this mess, a disorganized breakup of the Euro is a real possibility.  This catastrophic financial scenario would put world economies into a tail-spin, resulting in deep recessions throughout the world, including the United States.

To worsen matters, the Standard & Poor's financial organization has downgraded many banks and lending institutions.  This downgrade at this particular time has created even more worry among investors.  If banks and financial institutions are unable to lend to qualified companies and individuals, economies won't be able to expand to their fullest potential.  In other words, there is a stifling of real GDP growth.  In addition, cracks are beginning to form in the booming Chinese real estate market.  If a bubble exists in this market and quickly crashes, the Chinese will also be impacted by the world's continued economic instability.  

Forex Robot will continue to watch the global economic situation closely and report on political and financial events that impacts currency valuations.  

Black Friday

Members of the Forex Robot team continue to benefit from the very low prices available to shoppers at retail stores before the holiday season.  However, in this article, we want to touch upon a growing phenomenon in the United States that shocked the country's many citizens.  While the United States is all too familiar with a relatively high level of violence for a first world democracy, media reports tell stories of Black Friday shoppers pepper spraying others, shootings, security guard brutality, fights, and being indifferent to an older man that stumbled and died.  Forex Robot members appreciate bargain prices as much as the next person, however, people in the U.S. must reconsider their priorities.  The holiday season should be about giving, not taking at any cost.  

On a more positive note, the Forex Robot team is pleased to report that the retail industry saw records sales numbers on Black Friday.  While most economists and financial analysts may interpret this news as positive, we see the results somewhat differently.  It may be an indication that while Americans do in fact have more money than recent years, it may also mean that Americans have intentionally waited until this time to make purchases.  Times are still very tough in the United States, and people are spending their money conservatively.  

Egyptian Riots

There is great concern among members of the Forex Robot team concerning the stability of the Egypt and the future of the Arab world.  For those unfamiliar with recent events, protesters have returned to Tahrir Square to denounce military rulers for deciding to retain power until the middle of 2012.  Many Egyptians consider the military a continuation of the Mubarak regime, which ruled the country for nearly 3 decades.  The popular uprising that ousted Mubarak was fueled by growing discontent among Egyptian citizens who were fed-up with nepotism, corruption, joblessness, police brutality and social inequalities.  

When Mubarak ultimately left office, citizens throughout the country rejoiced.  An interim president and government was established after Mubarak's departure. However, Hussein Tantawi, a former military leader under President Mubarak, took the presidency in February.  Even though general elections were scheduled in about a weeks time, thousands of Egyptians have poured into the center of Cairo demanding that the military transfer power to a newly elected president.  Since Mubarak stepped down from office in accordance with the people's demands, the country has seen divestment, increased crime, and a depreciating currency.  In fact, the Egyptian stock exchange, which was seeing strong growth over the last few years, has plummeted by more than 50%.  

One of our primary fears at Forex Robot is that the Muslim Brotherhood, now a vocal and significant player in Egyptian politics will win a majority in the country's politics.  Many poor and uneducated Egyptians with strong Islamic religious backgrounds support this growing political force.  However, this political party is openly against any peace treaty with Israel and is reportedly providing support to Hamas in the Gaza Strip.  Forex Robot is has closely watched the unfolding events in Egypt with fears of a possible Islamic-style revolution, which occurred in Iran after the Shah was ousted.  These fears become less imaginary when you hear reports of governmental officials deciding on what is "appropriate" for women to wear or not wear. 

If you disagree with our predictions, this may be a great opportunity to invest heavily in Egyptian markets and the country's currency.  Presently, 1 dollar buys 6 Egyptian pounds.  If the country stabilizes, the Egyptian currency will quickly appreciate, allowing you to make significant profits.  

OPEC Satisfied with Oil Prices

The Secretary of OPEC, short for the Organization of Petroleum Exporting Countries indicated in a statement today that the price of crude oil is at comfortable levels.  When you consider that oil prices were $75 dollars within the last 6 weeks, it isn't a surprise to hear support for these levels by an "employee" of the oil producing "cartel".  The Forex Robot team believes that current oil prices, which are hovering close to $100 continues to be elevated as a result of speculation.  As explained in an earlier post, this speculation stems from continued unrest in the Middle East , tension with Iran, and recent positive economic indicators in the U.S. (despite being without a plan to cut spending). While we recognize that countries like Brazil and many Asian countries continue to experience rapid economic expansion, thereby requiring more commodities and fuel, unresolved issues in the Euro-zone and debt issues in the United States will stifle demand.  

One could argue that the continued policy of monetizing debt by the Federal Reserve and the recent adoption of this strategy by the European Central Bank has and will continue to cause increased prices. This will make commodities more expensive to purchase.  Additionally, both the USD and EUR currency will depreciate against other currencies in the long term.  The real question we're asking ourselves among the Forex Robot team is whether the EUR will survive in it's current form.  The future of the Euro-zone continues to be uncertain.  Despite this, EUR/USD is trading over $1.35.  This means one of two things:  1.) The global community has very little faith in the USD. 2.) The EUR is too expensive and needs to be devalued through calculated stimulus packages.  This will in-turn cause the EUR to devalue against other currencies, making trips to Europe and European goods more attractive.  The flip-side of this policy is that other resources that European countries depend on that are produced elsewhere will become more expensive.  

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