First of all, look at where the EURUSD is, to get an international forex perspective, before commenting on the BRICS and trading:
EUR/USD is a commonly traded currency pair in the foreign exchange market. It represents the exchange rate between the Euro (EUR) and the US Dollar (USD). The first currency listed (EUR) is the base currency, and the second currency (USD) is the quote currency.
In the short term, the trend that began in September 2022, has to decide whether to hold, or lose.
Factors influencing the EUR/USD exchange rate include:
Interest rates: Differences in interest rates between the European Central Bank (ECB) and the Federal Reserve (Fed) can affect the attractiveness of holding Euros versus US Dollars, leading to changes in the exchange rate.
Economic indicators: Economic data such as GDP growth, inflation rates, employment figures, and trade balances can impact the perceived strength of each currency, influencing the exchange rate.
Political events: Political developments, elections, and geopolitical tensions can impact currency exchange rates as they affect investor sentiment and economic stability.
Market sentiment and risk appetite: Investor sentiment, market trends, and risk appetite can drive demand for certain currencies. The EUR/USD exchange rate can be influenced by changes in market sentiment and risk-on or risk-off environments.
Analyzing the EURUSD super chart, the EURUSD trend of the last 15 years is globally downward. Does that mean the USD is going to keep going down?
In my opinion, I consider that yes and for several factors.
But this article is to talk about what’s to come regarding the BRICS and trade, although I wanted to first analyze the situation of the USD against the EUR, to give you a point of technical analysis and future price vision.
The following graph shows the last 30 years of the EURUSD (although the EURUSD does not have much history, it is complemented by the union of the old national currencies of European countries that now make up the EUR, to give it more temporary space).
What´s next?
The BRICS (Brazil, Russia, India, China, and South Africa) is a grouping of emerging economies that have been increasingly influential in the global economy. While the BRICS countries have the potential to impact global financial dynamics, it is important to note that the notion of the BRICS “destroying” the US Dollar is an overly simplistic statement and not a likely scenario. Here are some points to consider:
Reserve Currency Status: The US Dollar currently holds a dominant position as the world’s primary reserve currency. This status is driven by factors such as the size and stability of the US economy, the depth of its financial markets, and the widespread use of the US Dollar in international trade and transactions. Altering this status quo requires significant structural changes and global consensus, which is not easily achieved.
Economic Size and Integration: While the BRICS countries collectively represent a significant portion of the global economy, they still face various economic challenges and differences in terms of economic structure, policies, and integration. Achieving the level of economic integration and stability comparable to the US economy would be a complex and long-term process.
Geopolitical Considerations: Geopolitical factors play a crucial role in global financial dynamics. The US has established and maintains a strong geopolitical position, including its alliances, military power, and influence in international institutions. These factors contribute to the enduring strength and global acceptance of the US Dollar.
Currency Dynamics: Currency exchange rates are influenced by a multitude of factors, including interest rates, economic indicators, market sentiment, and political developments. While the BRICS countries can collectively influence currency movements, they do not possess the ability to unilaterally “destroy” the US Dollar. Currency markets are complex and influenced by a range of global factors beyond the control of any single country or group of countries.
Cooperation and Collaboration: The BRICS countries have shown a desire to enhance their influence in global affairs and reduce dependency on traditional financial systems dominated by Western powers. They have taken steps to establish alternative financial institutions, such as the New Development Bank and the Contingent Reserve Arrangement. However, their efforts have been focused on diversification and providing additional options rather than aiming to directly undermine the US Dollar.
I found the graph above and found it very clear. If it is necessary to say that it is from 2019 and in the last 4 years, the population has increased, the global GDP has increased, world trade has increased, it is maintained, of course the world land area and the world voting power has also increased).
3,000 million people, are the ones that add up, the 5 countries that make up the BRICS…
Trade plays a vital role in shaping the economic growth and development of nations. The level of international trade is often reflected in a country’s Gross Domestic Product (GDP) per capita, which is a widely used measure of the average economic well-being of its citizens. This article explores the significance of trade in influencing per capita GDP and discusses the various ways in which trade impacts a country’s economic performance.
Trade and Economic Growth:
Trade can be a significant driver of economic growth. By engaging in international trade, countries can access larger markets, benefit from economies of scale, and capitalize on comparative advantages. Increased trade can lead to enhanced productivity, expanded output, and improved efficiency, ultimately contributing to higher per capita GDP.
Market Expansion and Diversification:
International trade allows countries to expand their markets beyond their domestic boundaries. By exporting goods and services, countries can tap into global demand and increase their revenues. Similarly, imports provide access to a wider variety of products and resources, promoting consumer choice and fostering competition, which can drive innovation and economic growth.
And with this we have finished this Sunday article, where while you have breakfast, we have analyzed:
1. The EURUSD has to decide, but in the short term it could lose its one-year support.
2. In the long term, the USD is weakening, globally…
3. The arrival of the BRICS, and the possible currency that they can create together, will make it the global currency of reference, replacing the petrodollar (Reminder that the USD has no tangible asset to hold it and has been held in a certain way, for oil, but this era… seems to be ending soon). Leaving gold as its pattern in 1971 will finally take its toll. Without forgetting that fiduciary currencies, having no tangible asset to hold them, their intrinsic value, is equals 0. This may be hard to read, but it is what it is.
4. It seems that, in addition, new countries are going to join the BRICS, thus giving a return to international geopolitics. If in the future they also tell us that this future currency will be backed by some tangible good, it will become the standard pattern, at an economic level. This always and now, with bitcoin permission, for the following reason:
Many still do not understand bitcoin, but you have to understand that it has a tangible asset that holds it; it’s called electricity. Also, do not forget something very interesting, and that is that it is “disinflationary”. Which means that although new bitcoin is created, every 4 years in its halving, it happens that the new issuance is reduced by half.
Enjoy breakfast and happy Sunday.