2016 Investing Bang – China, Iran, Saudi Arabia
Happy new year my lovely investors! As many of you know, I'm still in the Land Down Under keeping a close eye on Mr. Aussie. But this doesn't mean we didn't feel the bang of the other side of the world the first trading day of 2016.
My husband woke me up in the middle of the night to let me know that US stocks were tanking (yes, I've got him into investing and now I'm paying the price) so I was forced to start my new year trading in my pajamas. But we sure did catch a number of delicious market moves both in forex and stocks.
First, let me tell you what the heck is going on, and then we'll get down to business with some trading ideas.
Iran and Saudi Arabia going at it head-to-head
My country of origin and the home to Persian cats (Iran) has historically had major problems with Saudi Arabia; over oil, over the name of Persian Gulf, over the history of Islam (Shiite vs. Sunni) and over race (Persian vs. Arab.) These long-lived conflicts were fueled over the weekend when Saudi Arabia decided to execute 46 prisoners, including popular Shiite cleric Nimr al-Nimr.
On the news, Iranian protesters ransacked and set fire to the Saudi embassy in Tehran. In return, Saudi Arabia moved to cut off all commercial ties with Iran, and ban its citizens from travelling there.
What does all this have to do with trading? I have two word for you: 1-oil, 2- geopolitics
As I've explained in the Invest Diva's education course, market sentiment can easily be affected by such geopolitical tensions. More over, anything that happens in the oil-rich Middle Easters countries creates tensions in the oil market which then impacts all other markets that have connections to oil prices.
Last year OPEC refused to cut production even as prices have plummeted, with the larger players such as Saudi Arabia looking to edge out the competition from U.S. oil producers. On the opposite end, Iran has been calling for production cuts to ease supply and provide a bit of support for oil prices. But with Saudi Arabia and its allies UAE and Kuwait calling the shots, the recent conflict might lower the odds of an actual reduction in oil production in the near future.
In the mean time, tensions in the region could create possibility for the US and Russia to sell more weapons to these countries, boosting there manufacturing. Sick, I know,but unfortunately this is how the markets work.
Most investing instruments including forex, stocks and ETFs swooned on the first trading day of the new year, as the effects of a panicked sell-off in China's mainland stock markets spread across Asia, Europe and the U.S.
On Monday, Chinese equity indices were down by almost 7% and dragged most global stock markets along with it. After all, China is the world’s second largest economy so any downturn in its performance could have significant spillover effects on the rest of the globe.
Forex Market Impacts
As the markets started the year in panic mode, many investors turned to safe-havens and we can still see the impact on the market sentiment well into Tuesday. Ms. Japanese Yen has risen against most of her major forex dancing partners, and Ms. USA is struggling to keep up with the Yen.
They both are doing pretty well comparing to Mr. Euro, Mr. Aussie, and Mr. Kiwi. And these are precisely the trades that I caught up early in the morning, all against the US dollar. The EUR/USD, AUD/USD and NZD/USD are going DOWN baby! Don't forget to follow the Invest Diva guidance in selecting proper exit strategy that suites your account.
For stock market strategies, let's chat privately mate.