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If you’re like me, you’ve been watching the events in Egypt unfold over the past few days.
I’ve been following reports closely on TV and online as I feel that this is an historical event that can have massive effects on the world.
If you don’t know what I’m talking about, here’s a brief summary:
After 30 years of tyrannical rule by Hosni Mubarak, it seems that the Egyptian people have had enough. They’ve been flooding the streets in their thousands, demanding that Mubarak step down and allow for open and free elections. So far, he has refused to comply.
The result is chaos in Egypt, one of the most important countries in the Middle East. The future is uncertain: some hope that democracy will be born and stability restored and others fear that a new tyrant will emerge, this one more warlike than Mubarak and lead the region into worse times.
There are many reasons why you should care about this, but as this is a Forex site, let’s focus on the two things that may happen in the case of the US Dollar.
Option #1 – Fear grows, the Dollar Rises
The Us Dollar has long been a safe-haven currency. It has proven to be the refuge anytime it seems like the market is heading into trouble. Well, the fear levels have certainly risen. Fear that Egypt will destabilize and that other Arab countries will follow is raising a lot of concerns. This is good for the Dollar.
Option #2 – Oil rises, dollar falls
The fears about Egypt and the Middle East in general may also lead to rising oil prices (something which is already happening at this moment). As Oil is quoted in US Dollars, the higher its price, the lower the Dollar tends to be. It’s a simple question of “How many Dollars do I need to buy a barrel of oil”.
As you can seem, there are two conflicting forces in play here. Fear is good for the Dollar, rising oil prices is very bad. The key is to follow oil prices and news of Egypt over the next few days. The longer Mubarak stays in power, the lower the fear in the market. However, if he does lose power, you need to keep your eyes on Oil prices to have a better indication of where the Dollar is headed.
For more predictions visit my US Dollar Forecast 2011
I apologize that this post comes a bit late. I should have gotten this to you earlier but there is still time for you to take action on this.
‘Forex’ Joe Atkins is showing off his new trading system tonight in an open webinar. The webinar is free to join but space is limited so you better hurry and reserve your spot.
The webinar is at 9 PM EST so this may not be right for people outside the US but if you can make it, it’s worth staying up for.
Joe Atkins is known for developing advanced trading systems which make it simpler to predict and act on high probability trading opportunities. I have a feeling that this new system will be one that you’ll find very interesting.
Click here to reserve your spot for tonight’s webinar with Joe Atkins
Atkins has spent years testing various trading techniques and methods. He is constantly trying to improve his skills and he liked to share those skills with other serious traders. Naturally, I can’t guarantee that you will like his new system or that you will find that it’s right for you.
However, an open-minded Forex trader always tries to learn new methods and techniques. This is a perfect opportunity for you to expand your trading knowledge and become a more skillful and better informed trader.
Hurry and reserve your spot before they all run out:
Click here to reserve your spot for tonight’s webinar with Joe Atkins
The beginning of 2011 finds the United States still in the midst of a recession. While there are encouraging signs which hint at a strengthening recovery, the unemployment rate in America is still high and the economy is still fragile. The economic situation makes it difficult to give a definite US Dollar forecast for 2011. However, there are some scenarios which make more sense and seem to have a great chance of happening.
1. At the moment, there is a sense that the economic crisis is a thing of the past and fear of a downturn is low. There seems to be a reverse connection between the level of confidence in the market and the value of the US Dollar. The Dollar serves as a sanctuary to which money flees when fear rises. If the current sense of optimism falters, the Dollar will likely increase in value.
In 2011, there are likely to be several cycles of rising and lowering fear, so the Dollar is going to fluctuate in 2011. This will give a lot of opportunities to many traders. You can make a considerable amount of money by trading according to these cycles.
2. The US Dollar is under attack as the global reserve currency. With the level of US debt being as high as it is (approaching 14 trillion), a lot of countries feel that the Dollar should make way to a basket of currencies, or the Euro. I don’t see this taking place in 2011, but if it does, the value of the Dollar may plummet dramatically as there will be big sell-offs.
3. The current interest levels in the US are near zero. During 2010, there were analysts who predicted that these rates will rise. It didn’t happen, partly because the US economy did not recover as quickly as hoped. In 2011, if indeed the recovery takes hold, US interest rates will rise. This will undoubtedly increase the value of the dollar. As interest rates rise, investors will be able to receive a greater return on their investment in Dollar quoted holdings. This will make the dollar more attractive and drive more money in its direction. This part of my Dollar forecast for 2011 is the one I’m most certain of.
4. The Dollar and Euro are the two most commonly traded currencies in the world. The Euro is also the biggest “competitor” of the Dollar. A strong Euro will likely mean a weak Dollar. In 2010, the bailouts of Greece and Ireland weighed heavily on the Euro. In 2011, the prospect of another Eurozone member collapsing is going to make the Euro a shaky investment.
This isn’t a flimsy prospect. Spain, Portugal, and Italy are in vert bad shape and if one of them requires a bailout, the Euro may fall. If the Euro falls, the Dollar will likely rise.
I believe that 2011 will be a good year for the Dollar. It’s impossible to know for sure as a year is a long time, but this is my dollar prediction for 2011.
 2010 was a tumultuous year for the Euro. It went as low as 1.1$ and is now trading at 1.329$. This was also the year in which we saw the bailouts of Greece and Ireland. Click here to see a trend of the EUR/USD
Now it’s time to think about the future so I want to share with you my Euro Prediction for 2011. Let me just emphasize that this is what I think may happen to the Euro in the coming year. However, as is usually the case, I’m fully prepared to be surprised by what will actually happen.
I think that the Euro is headed for another turbulent year. I think we will see it move in a wide range of prices as it reacts to both political and financial developments, inside Europe and without.
The Euro may suffer due to two major developments:
Further Bailouts
With the bailouts of Greece and Ireland still not sure of turning out as effective, Europe may find that it needs to bailout another Eurozone member. The PIIGS countries also include Italy, Portugal, and Spain. The first and third countries in that list are much bigger than Greece and Ireland. Bailing them out may prove to be impossible. If either of these two countries show further worsening in its financial conditions, the Euro will likely suffer and we may see it fall beneath the lowest levels of 2010.
US Recovery and Interest Rates
In the US, the financial recovery may be picking up steam. There are very encouraging signs of how America may be climbing out of recession and into a renewed growth. This can help the US Dollar appear more attractive in relation to other currencies, including the Euro. As the Eur/USD is the most traded currency in the world, a reduction of its prices may weigh down on the Euro across all of its other pairs.
In addition to the prospect of US recovery, there is also the likelihood that interest rates will rise in America in 2011. While it was believed that such increases will occur on 2010, the slower than expected recovery delayed such action. If the recovery will no take hold, interest rates in the US may indeed begin to climb, making the Dollar a more attractive currency, further damaging the Euro.
In addition, 2010 showed how the Euro policy is being pulled in every direction possible by the different interests of the 16 Eurozone members. This is likely to continue in 2011 and make it very difficult to determine an optimal monetary policy.
If the worst case scenario comes to pass and one or more members will leave the Eurozone to return to its former currency, the price of the Euro may take a big dive. However, the chances of this happening are very slim.
This is my Euro Prediction for 2011. Let’s see how accurate it will be.
Recommended Forex Video
Check out the following recommended Forex trading video: Weird Forex Story Video.
Image source: Wikipedia
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