On January 23rd, The World Economic Forum 2014 in Davos opened its doors. Still, the event doesn't seem to attract as much international attention as it used to be (say, a decade ago). Still, it is a major event in the economic and financial world.
What are the issues on the agenda? What are the goals to reach and decisions to make? How can it influence the global economy and the international Forex market in the near future? Let's try to ponder on these questions together with Masterforex-V Academy.
Financial Crisis and Environment as Major Economic Risks
These days, the economic situation is different from the one seen a decade ago. We are living amid economic crisis, financial uncertainty, volatile markets and austerity. Businesses are more difficult to run in such conditions. Politicians and economists are perfectly aware of that despite all those reassuring statements made by the World Bank and the IMF. Game changers are needed desperately. Still, it is necessary to attract those people who are capable of changing the rules of the game.
Still, we are more interested in the report prepared for the forum. In particular, it says that macroeconomic risks are major economic challenges the global economy in general and multiple national economies in particular are going to face this year. Apparently, budget and debt crises have been affecting household incomes worldwide for years. The economies cannot boast flexibility while young people are limited in choice. The gap between the rich, the middle class and the poor is still widening. Financial crises forced local authorities in many countries around the globe to practice austerity (including spending cuts) thereby aggravating the situation, which may eventually result in social disturbance and protests since people are fed up with living on the verge of poverty. We have already seen the Arab spring and protests in South Africa, Brazil, the EU (including Greece and Spain ).
In other words, the list of the most dangerous risks looks as follows:
Fiscal crises in major economies
Unemployment
Lack of pure fresh water
Social gaps
Climatic changes
Natural and technogeneous disasters etc.
The biggest problem of the Davos forum is that there is no discussing complex and real problems of the contemporary economy, which creates delusions that there are chances of coming ot of the prolonged crisis. It seems like the participants of the forum do not see the systemic/structural mechanism behind the existing global economic slowdown. It seems that another forum is not going to end up with a major achievement or a breakthrough in terms of resolving the situation.
Forex Experts on Davos Forum and EURUSD Prospects
Despite the fact, that the forum gathers the financial and political elite of the entire world, it never ends with major decisions that could change the situation drastically. The forum is designed to let the elite discuss possible solutions and the ways and means of changing the existing world.
Apparently, some decisions and discussion will be reflected in currency exchange rates, especially EURUSD.
Let’s consider the mid-term situation for EURUSD. The beginning of the year brought a change in the existing price tendency. The rally started on November 7 2013 changed for a downtrend, which started on December 27th 2013, right after Christmas.
What can we read in the chart above? As far as the long-term rally started on June 2012, there are no reasons to consider it finished yet. The major wave (the brown arrow) stays unbroken.
The innovative method of analysing the market developed by Masterforex-V Academy ( it merges wave count and volume) gives us an opportunity to see the overall picture with key points and drivers.
Since October 2013, the price moves have been of speculative nature. This is a sideways market in a wide price range (some 600 points). There is redistribution of volume going on within the range. The current market interest is located around 1.3520-1.3605.
If to consider the fact that the investigation concerning possible market manipulation and abuse from the side of major banks is still underway, we may expect a return to observing the rules after the Davos forum.
Will the financial elite be able to compromise or will we see more confrontation? Traders will see that when the price has chosen the side by consolidating above/below the mentioned levels. If the price consolidates below 1,3520 and the brown MA, it will give us to understand that the US Dollar stays strong. On the contrary, a break and consolidation above 1.3605 and the green MA will indicate that the Euro is strong against the US Dollar.
