Friday, August 30, 2013

Egypt, Syria and Forex

I decided to take the day off today as I needed a breather from everything at work and recharge my batteries. This basically means I work from home, but that is a different topic. I wanted to use today to discuss something very briefly or at least put the question out there and you guys to what you want with it.

I have had several discussions with forex traders and I was surprised how only a few realized the importance of developments out of Egypt as well as Syria. On one hand I was surprised of their utter lack of knowledge, but on the other hand I am glad they work for our competition and not on my trading floor.

While it is true that the Egyptian Pound as well as the Syrian Pound are not heavily traded currency pairs and most don’t even have access to them; that problems in Egypt as well as Syria won’t have an indirect impact on major currency pairs such as the EURUSD and GBPUSD as well as the USDCHF and USDJPY. Always keep in mind that the world is connected and what happens on one end of the world will ripple to the other.

Egypt is home to the Suez Canal which is a major transport route for crude oil and natural gas and should the terrorists, the Muslim Brotherhood, get a hold of the canal and either block it or damage it then the entire global oil market will feel a supply strain which will cause oil prices to spike and therefore have an impact on the consumer which drives almost 70% of all economic activity.

Furthermore, crude oil is used in plenty of other commercial products such as rubber and plastics that it will have a negative impact on other industry sectors which in turn will be evident in GDP figures. Weak GDP figures may alter how central banks interact and that can weaken or strengthen individual currencies and therefore impact major currency crosses in an indirect way.

Those who fail to realize and underhand that are nothing more than misinformed retail traders who claim to act in a professional capacity. I was laughing at the ignorance displayed by our competition which makes it even better for us as we have less people chasing the same opportunity and that is how money is being made.

Syria is equally important to the oil trade as their biggest ally Iran could shut the Strait of Hormuz which is responsible for over one-third of global crude oil traffic and therefore impact oil prices, consumers, the economy and currencies in a similar manner. Don’t be ignorant like our competitors and understand what could happen under different circumstances as your lack of knowledge is and will be directly reflected in your trading account.

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