Weekly analysis: The BRIC coin

by Thinus Briers | Sep 5, 2023 | Forex Analysis

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Weekly analysis: The BRIC coin

First, what is BRICS?

BRICS is an acronym that represents an association of five major emerging economies: Brazil, Russia, India, China, and South Africa. These countries are known for their significant influence on regional and global affairs, primarily due to their large populations, expanding economies, and geopolitical importance. BRICS was originally known as “BRIC” before South Africa joined in 2010, making it BRICS. The group conducts regular summits to discuss and collaborate on various political, economic, and strategic issues, aiming to promote cooperation and influence in international arenas. It serves as a platform for dialogue and coordination among its member states on topics such as trade, investment, development, and global governance.

Creating a new currency for the BRICS (Brazil, Russia, India, China, and South Africa) group of countries is a complex endeavour with significant economic, political, and logistical challenges. However, let’s explore a theoretical concept of a possible new BRICS currency:

1. Motivation and Goals:
The BRICS countries might consider introducing a common currency, BRICSCoin, to achieve several objectives:

Economic Integration: Facilitate trade and investment among member nations by eliminating currency exchange rate risks and transaction costs.

Reducing Dependence on the US Dollar: Decrease reliance on the US dollar as the world’s primary reserve currency, providing more autonomy in global trade and finance.

Enhanced Global Influence: Enhance the collective economic and political influence of BRICS nations on the global stage.

2. Design and Implementation:
Creating BRICSCoin would require careful planning and cooperation among the member nations:

Currency Peg: Initially, BRICSCoin could be pegged to a weighted basket of the national currencies of BRICS countries to establish a stable exchange rate.

Central Bank Coordination: Establish a joint central bank or a coordinated monetary policy committee responsible for issuing, regulating, and managing BRICSCoin.

Reserve Requirements: Each BRICS country may need to maintain a certain portion of its foreign exchange reserves in BRICSCoin to stabilise its value and ensure liquidity.

Currency Board System: Implement a currency board system to maintain the value of BRICSCoin, where the currency is fully backed by foreign exchange reserves.

3. Challenges and Considerations:
Creating a new currency for the BRICS group would involve various challenges and considerations:

Economic Disparities: BRICS countries have vastly different economic sizes and structures. Managing the economic disparities would be a significant challenge.

Sovereignty Concerns: Member countries would need to balance their sovereignty with the need for central coordination, which can be politically sensitive.

Stability and Confidence: Maintaining the stability and international confidence in BRICSCoin would require sound monetary policies, transparency, and credibility.

Global Acceptance: Ensuring global acceptance of BRICSCoin beyond BRICS trade partners would be essential for its success as a global reserve currency.

Transition Period: A well-planned transition period would be necessary to allow businesses, financial institutions, and citizens to adapt to the new currency.

4. Benefits:
If successfully implemented, BRICSCoin could bring several benefits:

Trade Facilitation: Simplify trade and reduce transaction costs among BRICS countries.

Reduced Dependency: Decrease dependency on the US dollar and other Western currencies in international trade and finance.

Increased Collective Influence: Strengthen the collective influence of BRICS nations in international financial institutions like the IMF and World Bank.

5. Risks and Concerns:
There are also potential risks and concerns:

Exchange Rate Volatility: The value of BRICSCoin could be subject to volatility, especially during its initial stages.

Sovereign Interests: Differing national interests within BRICS could hinder coordination and stability.

Global Acceptance: Convincing the international community and financial markets to adopt BRICSCoin would be a significant challenge.

In conclusion, while the idea of a new BRICS currency, such as BRICSCoin, has potential benefits, it is a highly complex and challenging endeavour. Achieving the necessary cooperation and overcoming the economic, political, and logistical obstacles would require extensive planning and commitment from all member nations.

DXY chart:
Strong move away from a key area on Friday.

Energy & Metal Prices;

Gold;
Strong gold push last week, halted by a strong $ on Friday.

Oil;
Looking very bullish now.

Bitcoin;
Strong $ putting pressure on crypto this week.

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You can also follow us on Twitter https://twitter.com/marcwalton

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Red flag news:
AUD interest rate news this week.

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MAJORS

See the video for a more detailed explanation on my thoughts on the majors.

EUR/USD: 1.0800 is key for me. I would like to see a clear break down and then pull back to this level to short (see video)

USD/CHF: Short from 0.9060

GBP/USD: Long from 1.2500

AUD/USD: Short from 0.6700

NZD/USD: Short from 0.6200

USD/CAD: Long from 1.3350

USD/JPY: Still leaving alone for now.

CROSSES

EUR/GBP: Short from 0.8610

EUR/CAD: Short from current position. (See video)

AUD/CAD: Short from 0.89400

GBP/AUD: Long from 1.92500

GBP/CAD: Long from 1.68500

GBP/CHF: See video.

AUD/NZD: Long from the current position -1.0830

As always, remember correlation! -Especially when taking more than one JPY trade!

M3 -Shorter timeframes.

I do my analysis on daily and weekly charts first and make a note of the MAJOR areas of support and resistance. Then copy them onto Pierre’s Earth and sky template. Then I make a note of the weekly & monthly pivots points and add them to the charts. You will see lots of opportunities line up during the week. The important thing then is to select a bias for the next few days and do NOT take trades if the price is too near a trend line or pivot. Ideally, you want to buy when the price is near a major support and or pivot point line and has the potential to make at least 40 pips. Vice versa for a short.

New members, please note: If I am looking to take a trade long, for example, 1.5000, I place my order 10 pips above & 10 pips below for a short. This is because price often does not quite reach a major line and you need to allow for spreads.

We are NOT a “tipping service” our aim is to teach you how to trade for yourself.

Watch the video below for more detailed explanations of this week’s analysis and trade plan (click the 4 arrows bottom right to view full-screen):

Regards
Thinus

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