Archive for November, 2023

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.  

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, 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.  

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