Forex Response to a Chemical Weapons Agreement on Syria

The Forex response to a chemical weapons agreement on Syria included a rising Euro versus the US dollar. An agreement between Russia and the USA will lead the way to location and destruction of all chemical weapons in Syria. The same agreement greatly reduces the likelihood of US airstrikes and subsequent direct intervention on the ground in Syria. Although this is good news for the USA it is even better news for the European Union because of the proximity of the civil war in Syria to Europe. The Forex response to a chemical weapons agreement on Syria reduces the Syrian civil war as a driver of currency rates. The much anticipated tapering of the US Federal Reserve stimulus purchases of treasuries and mortgage bonds has risen back to first place as a factor in valuation of the US dollar versus all other currencies. All other factors for the US economy are seen as indicators of how the Fed will react. At this point the Forex response to a chemical weapons agreement on Syria may be more one of relief for the players in a region beset by turbulence for several years.

Forex Response to a Chemical Weapons Agreement on Syria in the Longer Term

The Arab Spring started with a democratic takeover of the governments in Tunisia and Egypt and has progressed to the violent overthrow of the dictator Gadhafi in Libya and widespread unrest and the overthrow of an increasingly Islamic government in Egypt. When an uprising in Syria threatened the overthrow of a long term dictator many cheered. However, the addition of Jihadists to the mix in Syria has led many to believe that the old dictatorship of President Assad is not so bad after all. The conflict in Syria has drawn in the USA, Europe, Arab patrons, and Iran as sponsors of various parties vying for control of a crossroads area of the Middle East. Whenever the Middle East is in turmoil oil supplies are threatened. The Syrian Civil War has sent a million refugees to neighboring countries and now into Europe. Thus the Forex response to the crisis in Syria has been to threaten regional currencies and the Forex response to a chemical weapons agreement on Syria and a possible reduction in hostilities has been positive. To the extent that regional conflict threatens oil supplies Japan and the Yen are involved. The Forex response to a chemical weapons agreement on Syria will likely be good over the long term for Forex currency rates and the Yen.

Short Term Trading Response to a Chemical Weapons Agreement on Syria

A contrarian view to trading currencies is that good news never lasts. Many trade Forex options in order to profit from the currently unexpected. Options trading allows a Forex trader to make money without ever buying or selling a foreign currency. What a trader does is buy, or sell, an options contract. He carries out fundamental and technical analysis and believes that the price of his or her options contract will go up or down in the near future. When the underlying currency pair performs as anticipated the Forex options trader exits his or her position by making the opposite trade. The trader receives payment in the options account without ever buying or selling US dollars, Yen, British Pounds, or Euros.