The European Union (EU) and International Commodities Deal Commission (ICDC) have coordinated their efforts to strengthen the role of the European Union in global commodities markets. This effort is partly based on the fact that the EU’s Common Market for Quotas (CEM), the Common trade programme, is unlikely to be able to deliver the same kind of influence on the price of oil and other commodity currencies that the Kyoto Protocol has been able to do. The EU’s Quotas may not even materialise, therefore the focus of the current effort is to enhance the relative strength of the US Dollar, especially against other major currencies. The current forecast for the price of oil is for US dollars to become stronger against most other major currencies within the next five years.
EURUSD and GBPUSD This particular pair represent the major trading pairs in Europe, Asia and Australia. In the Financial Analyst article referenced below, I compare the two currencies and then conclude the article with a look at the future potential for AUDUSD and NZDUSD. Based on my calculations and experience, it appears that the Euro was overpriced by EURUSD in the spring of 2021. This created an enormous demand for the Euro and drove up its price against most of the major currencies. The bubble burst shortly afterwards, however, and has been one of the key catalysts behind the recent fall in the price of gold.
As implied by my analysis above, this situation created a perfect opportunity for the underwriters to exploit the opportunity and secure a position in both the EURUSD and the GBPUSD. If I am correct, and there is no major economic or political events occurring in the immediate future that can lead to a sudden change in the bond market rates, I expect that this position will only be confirmed in the very near future. It is important to bear in mind that although the European debt crisis is now over, there are likely to be many more recessions and economic shocks in the future. Economic recessions do not usually last longer than five years.
In fact, a recent economic study indicates that we may see another major currency breakdown before the end of this year. To date, the EURUSD and the US dollar have been the stronger pairs in the over the counter market and this may change with the onset of deflation in the United States. As the AUDUSD and the NZDUSD move towards a possible link, the strength of each of these currency pairs will also be affected.
The present weak state of the euro is not expected to last forever, although analysts believe that this will eventually lead to a strengthening of the EURUSD and the GBPUSD. The problems are currently being felt in all major areas of Europe including Portugal, Italy, Spain, Greece and Cyprus. A weak euro will weaken the purchasing power of the euro, which will subsequently push up the cost of imported goods. It has already had an impact on import bills in certain countries such as France and Italy. An increase in import costs will depreciate the national currency and this could result in an increase in the demand for the base currency of these countries.
The European Central Bank (ECB) and other international financial institutions have been following a course of action which consists mainly of conducting market operations to support the weaker euro. The common interest is to keep the euro weak until the end of the year when the interest rates are expected to increase. However, indications are that this approach is not going to work this year. Some economists believe that the weak euro will continue its climb this year and they expect it to break through the psychologically important $1.50 mark against the US dollar. Other indicators are pointing to the fact that the EURUSD will remain strong against the euro this year. These are the views of experts who have analyzed the economic situation in Europe and the implications for the UK economy.
There are three types of investors in the Forex markets including the “major currencies” which are the US dollar, the British pound and the Euro. The other “waves of currency” are those of the “specialized currencies” such as the Australian dollar, Canadian dollar, Swiss franc, Japanese yen, New Zealand dollar and the Euro. The analysis which follows a discussion of trading strategies in the major currency pairs is based upon the assumption that the strength of the major currencies will depreciate or increase during the period.
Trading strategies which consider that there will be a significant decline in the price of the euro against the US dollar will suggest buying of the AUDUSD, because the gurus is believed to be overvalued. The strategy also suggests selling of the AUDUSD when the price is increasing against the US dollar. Similarly, strategies based on the assumption that there will be a significant increase in the price of the GBP will suggest that the selling of the GBP should be seen as the most appropriate course of action.